In July, Batman fans glided into GameStop Corp. retail sites to purchase the Caped Crusader’s latest video game.
But Grapevine-based GameStop, the latest U.S. video-game specialty retailer, isn’t counting on comic book heroes to come to the rescue in the rough-and-tumble retail world of the 21st century.
Also in July, the company closed on the $140 million acquisition of online merchant Geeknet Inc. in a deal that will add memorabilia that appeals to many of its current customers.
“This acquisition is another example of our on-going efforts to leverage our core competencies to diversify and expand into new and growing categories,” said Paul Raines, CEO of GameStop. “The collectibles category is a rapidly growing segment and Geeknet provides us with a strong consumer brand, product development expertise and meaningful vendor partnerships, all of which position us to become the market leader.”
The acquisition combines GameStop’s 6,600 stores with a retailer that sold $140.7 million of geek-chic merchandise last year, mostly through its ThinkGeek website. GameStop is betting that ThinkGeek’s offerings, which include “World of Warcraft” pint glasses, “Star Wars”-themed bath robes and “Mass Effect” hoodies, will be an easy sell to its customer base of avid video-gamers.
Even without Geeknet, GamesStop has been busy. The company is benefiting from a combination of strong software titles, led by new games such as “Mortal Kombat X,” “Battlefield Hardline” and “Dying Light,” along with steady year-over-year sales of game consoles and other hardware, company executives said.
“Several key segments continue to be strong,” Michael Olson, a Piper Jaffray Cos. analyst who recommends buying the stock, said in a note to investors. GameStop’s share of the new software market, at 45 percent, was the highest in the company’s history in the first quarter, he said.
First-quarter net income rose 8.5 percent to $73.8 million, or 68 cents a share, the retailer said in a statement, beating the 58-cent average of analysts’ estimates. Sales grew 3.2 percent to $2.06 billion in the quarter ended May 2, sparked by a 9.6 percent gain in new software sales and exceeding estimates of $2.02 billion.
For the year, the company raised its profit guidance to as much as $3.83 a share, from a peak forecast of $3.80, citing a reduction in shares outstanding. GameStop continues to predict that sales, excluding new stores, will increase 1 percent to 6 percent.
The company plans to open 550 stores this year.
– Bloomberg contributed to this report.
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