GameStop holds the top score in video game retailing. Operating under the GameStop, EB Games, and Micromania banners, it's the largest retailer of new and used games, hardware, entertainment software, and accessories. It boasts some 6,675 stores in the US, Europe, Australia, and Canada; and operates 51 Cricket stores in the US. By carrying about 4,500 items, including more than 3,000 used titles, most of its revenue is generated by sales of video games and their software. The firm also sells downloadable add-on content from publishers. GameStop operates several e-commerce websites, offers GameStop TV in many of its locations, and publishes Game Informer, a video game magazine with some 7.9 million subscribers.
The company's reportable segments include Video Game Brands (more than 6,450 retail video game stores), Technology Brands (the newest segment, operating some 25 computer and smart phone retail locations in the western US under the Simply Mac, Spring Mobile, and Aio Wireless banners), and E-Commerce (online sales via about a dozen websites).
GameStop operates most of its stores in the US, where the company generates about 70% of its sales. It also maintains a healthy footprint in Europe (which accounts for 18% of revenue) and has an extended reach into Australia and Canada, which together bring in 12%.
Sales and Marketing
The company considers itself a destination location for gamers. It develops relationships with video game enthusiasts through its PowerUp Rewards loyalty program by allowing US consumers to trade in used video games for store credits on future purchases in its stores, on its US website, and on Kongregate.com. Its PowerUp Rewards program provides members with the opportunity to earn unique video game related rewards not available through any other retailer. Vendors also participate in this program to increase the sales of their individual products. It also has loyalty programs in France, Italy, Germany, Australia, and Spain. Altogether, its various loyalty programs total more than 27.5 million members.
GameStop spent $57.8 million in advertising in fiscal 2014 (down from $63.9 million in fiscal 2013), focused on newspapers, television, and other media. As part of its brand-building efforts and targeted growth strategies, the games retailer has been expanding its advertising and promotional activities in certain targeted markets at key times of the year. Additionally, GameStop expanded the use of television and radio advertising in certain markets to promote brand awareness and store openings. It's also working to leverage its loyalty programs to boost its membership base and is adding loyalty programs in international markets to build its brand.
Revenues increased 2% in fiscal 2014 to $9 billion as gamers who jockey for the latest and greatest video game software still choose to shop at GameStop. The launches of the Microsoft XBox One and the SonyPlayStation 4 hardware units in late 2013 contributed to the company's growing sales. The company's new Technology Brands segment added $62.8 million in revenues that year.
After reporting a net loss of $269.7 million in fiscal 2013, the company reported profits of $354.2 million in 2014. The increase was largely due to an increase in goodwill impairments, including an impairment of intangible assets after the company's decision to shutter its Spawn Labs cloud streaming unit (which GameStop says the industry has not quite embraced yet). Cash flow from operations rose $153 million in 2014 to $763 million, driven by an increase in cash provided by working capital as the company altered its payments schedule.
Despite the gloomy selling forecast for retailers during the past few years, GameStop has logged its greatest revenue increases during the recession and beyond. It's seeing the largest gains among used video game products as the company lures more frugal customers who want to stay in the game even with tighter budgets. More consumers are turning to existing video game products, rather than new, due to their availability and cost-effectiveness. That bodes well for GameStop, because used game products (with their higher gross margins) is the company's most profitable segment. However, GameStop is facing new competition from Wal-Mart Stores, which in 2014 announced that it will begin allowing customers to trade in used video games for store credit at most of its stores. (Best Buy and Target also buy used video games from customers.)
The company's goal is to continue to be the world's leading seller of video game products and to expand its computer and smart phone retail businesses. To maintain its foothold in new and used gaming, GameStop continues to target hardcore gamers, as well as those niche customers who purchase games as gifts during the holidays. GameStop subsidiary Kongregate, a gaming site launched for social play that attracts some 10 million users a month, has expanded its presence by releasing free-to-play mobile games.
GameStop is banking on growing its business through video games that are delivered to users in digital form and from the expansion of other forms of gaming. Products that relate to the digital category, including Xbox Live, PlayStation, and Nintendo network points cards, as well as prepaid digital and online timecards and digitally downloadable software. To this end, the company continues to investment in e-commerce, digital delivery systems, mobile applications, online video game aggregation, and in-store and website functionality. It also plans to invest in these processes and channels to grow its digital sales base and boost its market leadership position in the electronic game industry and in the digital aggregation and distribution category.
GameStop had focused on expanding its operations in the US and overseas, with most of its recent sales growth coming from outside the US. To its benefit, its business in Europe has helped to offset sales declines in the US related to decreased demand.
GameStop's stores are supported by several distribution centers strategically located to serve its global network of stores. Distribution centers in Texas and Kentucky serve the US segment, further supported by third-party distribution centers for new release titles. GameStop distributes merchandise to its Canadian stores from distribution centers in Ontario. It has a distribution center near Brisbane, Australia, that supports its Australian operations and a small distribution facility in New Zealand for stores in New Zealand. GameStop's European segment gets its merchandise from half a dozen regionally-located distribution centers.
In 2014, the company's GameStop Technology Institute unit established a partnership with AT&T to improve the speed and reliability of its in-store promotional materials and enhance customers' experiences.
Mergers and Acquisitions
In late 2013 the company acquired the 50.1% of Simply Mac that it didn't already own, boosting its Technology Brands segment. The $9.5 million deal added Apple specialty retail stores in Utah and Wyoming. Also that year, GameStop bought Spring Communications for $62.6 million.