GameStop’s New Highs After Earnings & Guidance (GME)

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GameStop (NYSE:GME) is trading up 7% pre-market on what will be new yearly highs and all-time highs after posting earnings.  A quick summary is $0.13 EPS  on revenues of $1.3382B versus $0.09/R$1.2B estimates (prior guidance was only $0.06 EPS).  It now sees comparable sales up 30 to 32% and issued next quarter guidance of $0.19 to $0.21 EPS versus 0.18 estimates and raised its annual guidance.

Total sales increased 38.9% to $1,338.2 million in comparison to $963.3 million in the prior year quarter. Comparable store sales increased 29.1% during the second quarter, also beating previously released guidance of 16.0% to 18.0%. During the second quarter, new video game software sales surged 49% and new hardware sales soared 87%.  GameStop surpassed the 1,000 store count internationally and said it is on the way to achieving its forecast of opening between 500 and 550 new stores during the year.

RAISED GUIDANCE: For Q3 2007, GameStop is forecasting comparable store sales to range from +30.0% to +32.0%. Diluted earnings per share are expected to range from $0.19 to $0.21 (compared to $0.18 est.).  Due to strong Q2 it is raising full year 2007 diluted earnings per share guidance to range from $1.45 to $1.48; and revenues are now projected to grow between 20.0% and 22.0%, with expected comparable store sales ranging from +15.0% to +17.0%.

GameStop has to be loving the Wii.  The top selling video games during the quarter were GUITAR HERO II from Activision, NCAA FOOTBALL ’08 by Electronic Arts, MARIO PARTY 8 by Nintendo, Nintendo’s POKEMON DIAMOND and PEARL, and FORZA MOTORSPORT 2 from Microsoft.  Also on deck for the coming quarter is Halo 3 sales, and it appears that over 1 million copies have been pre-sold from video game retailers in the U.S. alone.

GameStop’s prior high is $44.76 on a split-adjusted basis, and shares are up around $46.00 pre-market.

Jon C. Ogg
August 23, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.