GameStop sees profits rise as it moves beyond retail games

The retailer continues to expand beyond its core remit of selling physical copies of games to embrace digital distribution and test out physical storefronts dedicated to merchandise other than games.

The first quarter of video game retailer GameStop's fiscal year heralds a rise in fortunes for the company, which continues to expand beyond its core remit of selling physical copies of games to embrace digital distribution and even whole physical storefronts dedicated to merchandise other than games.

Let's dig into the numbers: GameStop reported an 8.5 percent rise in profits year-over-year for its first fiscal quarter of 2015, which ended May 2nd. The company reaped $73.8 million on top of $2.06 billion in revenue, which was up 3.2 percent year-over-year.

Digital sales were a big talking point for GameStop this quarter, as they grew 17 percent year-over-year thanks in part to healthy sales of DLC for games like Evolve and Mortal Kombat X.

In a conference call with investors transcribed by SeekingAlpha, GameStop COO Tony Bartel also claimed the company saw its number of full game downloads "more than triple" during the quarter and noted that "we are seeing far fewer digital tokens packed into hardware and we do not expect significant digital pack-ins for the balance of the year."

That last tidbit there, about not expecting notable digital game pack-ins with hardware like graphics cards and console bundles, is especially intriguing in light of Bartel's comments to investors late last year that such deals were "driving the perceived value of digital goods significantly below that of a physical game."

GameStop is also looking to launch a series of storefronts dedicated to selling shirts, board games, cards and other non-game collectibles (though many will be game-branded) after seeing remarkable demand for these non-game items (which the company refers to as "loot") in select Australian locations.

"Due to the success of our in store loot expansion in Australia, we have also been testing over the past nine months a standalone retail concept called ZiNG Pop Culture," Bartel told investors. "The initial pilots have been successful, and we have ended the quarter with six stores."

It's yet unclear if the company will open such standalone merchandise stores in other regions, though Bartel did say that GameStop has used "key learnings" from its Australian market to expand the "loot" sections in its European and North American locations. 

This is hardly the first time the video game retailer has pushed into a new retail market, of course -- back in 2013, the company acquired wireless retailer Spring Mobile and Apple-focused retail chain Simply Mac.

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