In what was a dismal holiday season for many store chains, video game retailer GameStop Corp. proved an exception.
The company said Thursday its sales for the November-December period jumped more than 22 percent, boosted by strong sales of new games. Same-store sales, or sales at stores open at least a year, grew 10.2 percent in the nine weeks between Nov. 2 and Jan. 3.
Same-store sales are a key indicator of retailer performance because they measure growth at existing stores and exclude sales from newly opened ones.
Chief Executive Daniel DeMatteo said consumers are flocking to video games because they see their value. The $50 to $60 gamers plunk down for new titles translates to relatively cheap entertainment when looking at many hours of playtime they can get out of it.
Grapevine, Texas-based GameStop's sales hit $2.86 billion during the holiday period, which is the busiest time of the year for video game sales.
As a result, the company raised the low end of its fourth-quarter earnings guidance by 2 cents to between $1.31 and $1.34 per share. Analysts predict a profit of $1.31 per share.
Michael Pachter, an analyst with Wedbush Morgan, said in a client note he thinks GameStop can grow its earnings at a rate of 15 percent to 20 percent for three more years beyond 2009. The company's reticence to raise guidance Thursday, he added, is "overly conservative, as its core customer is likely to return in January." While GameStop focuses on both dedicated video game fans and more casual players, the core customer Pachter is referring to is the former.
Three of the season's top five best-selling games were from Activision Blizzard Inc.: "Call of Duty: World at War," "Guitar Hero World Tour" and "World of Warcraft: Wrath of the Lich King." Microsoft Corp.'s alien shooter "Gears of War 2" and Nintendo's exercise game "Wii Fit" were also among the top sellers.
Hardware sales were led by Nintendo's Wii and Microsoft's Xbox 360. DeMatteo called Sony Corp.'s PlayStation 3 a "great machine," but said it is just a bit pricey for the current economic environment. The cheapest Xbox 360, which comes without a hard drive, costs $200 and the Wii is $250. Sony Corp.'s 80-gigabyte PlayStation 3 console, which includes a Blu-ray player, sells for $400.
In another sign that video game customers are becoming cost-conscious, DeMatteo said GameStop's buy-sell-trade business has picked up amid the recession. With a record number of consumers trading in used video games, GameStop had more than enough used games at hand during the holidays to sell to people looking for a bargain.
Looking ahead to 2009, DeMatteo said while "no one could be absolutely totally optimistic," he thinks games will hold up well.
GameStop's shares jumped $2.97, or 13 percent, to close at $25.58. In the past 52 weeks, the stock has traded between $16.91 and $59.13.