Analyst Skeptical Of Best Buy Gaming Efforts On Flat Earnings

Analysts at Wedbush Morgan used today's release of quarterly earnings for electronics retailer Best Buy to warn the company may have trouble competing with GameStop in a highly competitive gaming market. Best Buy as a whole saw revenues for the quarter ended May 28 increase 1.4 percent from the same period last year, to $10.9 billion, as gross profits fell 0.9 percent to $2.77 billion. The company's entertainment segment -- which includes video game hardware and software sales as well as products like CDs and DVDs -- continues to be a relatively minor portion of Best Buy's business, representing 14 percent of revenues domestically and 4 percent of revenues internationally, both down slightly from last year. Best Buy has been making a concerted effort to attract more video game business this year, rolling out trained game-focused employees, dedicated gaming checkout desks, automated trade-in kiosks and pre-order promotions at hundreds of stores. But while a Wedbush Morgan analysis acknowledges positive momentum in Best Buy's gaming efforts, the firm notes that major competitor GameStop continues to gain market share despite the flurry of Best Buy activity. "We continue to believe that Best Buy cannot compete with GameStop in terms of customer loyalty (through PowerUp rewards), exclusive content (through DLC kiosks), or promotions (such as midnight launches)," the firm wrote. "We believe it will be challenging for Best Buy to poach consumers who are accustomed to going to GameStop for used games due to GameStop's convenience and better selection of games (GameStop has dominated the used games business for a long time)," the investor note continues. Speaking to Gamasutra last week, Best Buy senior VP of entertainment Chris Homeister admitted that the company has a long way to go in getting the word out about the company's game trading program. "We're just beginning," he said. "We've got work to do from a marketing standpoint for sure, but we're very pleased with the reception we're getting to our messaging. [How much] the average consumer knows that we're in these businesses, it's still low, no doubt about it. But though it's low right now, we're still seeing results that we like a lot."