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GameStop gives the people what they want (shareholders too)

·Editor in Chief

A lot of retailers were hit in the first quarter by a strong dollar, bad weather and the West Coast port strike -- or at least cited those factors as reasons for disappointing results. Then there are retailers like GameStop, whose shares were up 7% in recent trading after the video game retailer reported better-than-expected sales and earnings Thursday afternoon.

"We had a great first quarter," CFO Rob Lloyd declares in the accompanying video. "We had the same international currency challenges that a lot of companies did and it impacted our sales and revenues but...we were able to exceed our guidance for the quarter."

Indeed, GameStop's results beat expectations on both the top and bottom lines with earnings of 68 cents per share and revenue of $2.06 billion, the latter up 8.1% on a constant currency basis. Same-store sales rose 8.6% in the quarter and the company upped its full-year earnings guidance to $3.63-$3.83 from $3.60-$3.80.

Lloyd says the key to GameStop's Q1 success was something that seems self-evident but is often easier said than done in retail: Delivering what customers want.

"As long as publishers introduce great content that drives consumers into our stores, I think we'll be alright," he says.

In the first quarter, there was strong demand for titles such as NetherRealm Studios' Mortal Kombat X, Electronic Arts' Battlefield Hardline, Take-Two's Evolve and Warner Brothers Interactive's Dying Light. "Customers were lining up to get them," Lloyd said, further noting strong early demand for The Witcher 3: Wild Hunt, which was just released by Polish video game developer CD Projekt RED on May 19.

"We're pleased with what we've seen on Witcher 3...we've got to make sure we've got enough product to meet demand," he says, and is optimistic about the forthcoming release of Batman: Arkham Knight, the final installment of Rocksteady Studios' Arkham Trilogy.

GameStop is benefiting from the sales of the latest generation gaming consoles and in the first quarter crossed an inflection point where sales of new games for the Xbox One and PlayStation 4 exceed those of the prior versions, Lloyd said. "We're not at that point yet on preowned" games, one reason such sales slipped 3.4% in the quarter.

Beyond the newest titles and consoles, gamers also increasingly want digital downloads, which skeptics (and short sellers) believe pose a major threat to GameStop's brick and mortar business. But GameStop's digital sales rose 23% in the first quarter and is on pace to hit $1 billion this year, Lloyd says. "Most [of those sales] takes place in stores, which keeps us relevant from customers' perspective."

GameStop is also adding collectibles and merchandise like T-shirts and figurines to its stores which provides another incentive for customers to come to the stores. "In addition, because digital is growing, because the video game business is cyclical, we're finding ways to diversify our business overall," he says.

A big part of that diversification is the company's technology brands segment, which includes Simply Mac -- 71 stores selling a full line of Apple products, Spring Mobile for AT&T post-paid services and products, and Cricket Wireless stores, an AT&T partnership for pre-paid wireless phones.

GameStop plans to open 200 new tech brand stores in the next three months, and is converting several old Radio Shack outlets as part of its AT&T partnership, from which Lloyd expects continued growth.

The irony here being that bears think GameStop's fate is similar to RadioShack's because of the move to digital downloads. But, for the moment at least, this retailer is in the sweet spot.

Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at atask@yahoo-inc.com.