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GameStop sees declines in hardware sales, but growth in toy sales

Decreased game releases, universally down hardware sales, and the Puerto Rico closures all impact GameStop profits for Q1 2016.

GameStop's quarterly earnings call this afternoon covered the company's financial results after the closure of their Puerto Rican stores, and a less prominent games slate for the first quarter.

Sales dropped a total of 4.3 percent to $1.97 billion, and hardware sales dropped 28.8 percent. On an earnings call with investors, a GameStop representative attributed this drop in sales to a comparatively weaker slate of releases in the first quarter of 2016.

This time last year, the company was riding the sales of Grand Theft Auto V on PC, Mortal Kombat X, and Battlefield Hardline, but didn't have the same comparable releases this quarter. 

Used game sales dropped 3.7 percent year over year, and the company posted a Q1 profit of $65.8 million down from $73.8 million from this time last year. 

These results were in part due to two one-time charges for the closure of Puerto Rico stores, totalling $4.1 million and $2.6 million apiece. 

GameStop spent more time on the call playing up the company's continued investment in collectibles: toys and physical merchandise sales that have been the focus of the company's purchase of ThinkGeek and the establishment of their own publishing arm, GameTrust. The company plans to increase physical space within its stores for physical merchandise in response to growth in these sales, which rose 250 percent to $82.3 million.

The GameStop representative also emphasized two potentials fields of growth for 2016 and 2017: virtual reality sales and the Nintendo NX. The representative offered some conservative projections on these products, stating that the NX market could be worth $7.5 billion if it does even half as well as the Nintendo Wii. Their estimate on virtual reality puts the market as possibly being worth between $6.9 billion and $13.6 billion 

Though Overwatch's sales weren't counted in the Q1 results, GameStop noted that Activision's decision to sell copies of the game in advance of launch before activating the servers a few hours early helped drive physical sales of Blizzard's newest game. 

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