GameStop: New Game Sales Growth Overtaking Used, Nintendo Top Vendor

In Gamestop’s latest SEC regulatory filing, the major U.S. game retailer has revealed the changing landscape for dedicated video game retailers, with sales of new video games displacing used game sales, and Nintendo-created hardware and software 21% of all stock purchases by the chain. Specifically revealed in the detailed financial filing for the also internationally-trading firm - sales of new video game hardware, new video game software and used video game products grew by an approximate respective 55%, 39% and 21% in fiscal 2007, due primarily to new store growth and the increase in store sales. GameStop attributed the increases across the board to “the continued popularity of the Nintendo Wii following its worldwide launch in November 2006, the launch of the Sony PlayStation 3 in Australia and Europe in March 2007, and the release of several strong software titles in the fall of 2007, including Halo 3, Guitar Hero III, Call of Duty 4 and Rock Band.” In hard numbers, sales increased by $1.78 billion, or 33.4%, to $7.09 billion in fiscal 2007, compared to $5.32 billion in fiscal 2006. The sales broken down: - New video game hardware sales increased $595.2 million or 55.4% over the year, and increased as a percentage of sales from 20.2% in fiscal 2006 to 23.5% in fiscal 2007. - New video game software sales increased $788.2 million, or 39.2%, and as a percentage of total sales increased from 37.8% in fiscal 2006 to 39.5% in fiscal 2007. - Used video game product sales increased $270.7 million, or 20.6%. As a percentage of sales, used video game product sales decreased from 24.8% to 22.4%. - Sales of other product categories, including PC entertainment and other software and accessories, magazines and trading cards, grew 13.2%, or $121.0 million, from fiscal 2006 to fiscal 2007. The filing revealed that the majority of these sales came within the fourth quarter of 2007, with approximately 40% of sales and 58% of our operating earnings gained during the fourth fiscal quarter, which includes the all-important holiday selling season. Gamestop’s filing also revealed their vendor relationship, revealing that they purchase products from approximately 75 manufacturers and software publishers, and approximately five distributors. In particular, purchases from the top ten vendors accounting for approximately 80% of new product purchases in fiscal 2007 – with Nintendo (21%) Sony (17%) Microsoft (16%) and Electronic Arts (11%) individually accounting for most of the new product purchases.