GameStop Predicts 10-12% Industry Growth
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Specialty retailer GameStop expects total sales to grow by 10-12 percent to $9.68-9.85 billion in fiscal 2009 (ending January 30, 2010), despite the current global recession, according to an official statement to the stock market.Sensible predictions or just a repetition of the old "games are recession-proof" nonsense? Perhaps, for another perspective, turn to this editorial.
Still, the predicted increase is significantly less than the growth the company has now announced, with its fiscal 2008 full-year sales revealed as being up 24 percent to $8.8 billion, compared to 2007's $7.1 billion.
GameStop also revealed in its earnings forecast that it expects comparable store sales in 2009 to rise 4-6 percent, much lower compared to the 13.3 percent increase it saw with comparable store sales in the year ended January 30, 2009.
Though the expected growth is muted in comparison to last year's, GameStop still projects it will outperform the rest of the retail sector, even as it expects the recession to continue into the 2009 holiday season.
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[UPDATE: Commenting on GameStop's announcement, analyst Colin Sebastian of Lazard Capital Markets suggested that this announcement reflects the fact that "overall industry sales healthy, but performance is uneven."
He particularly noted: "Solid holiday numbers from GameStop support our view and checks that industry sales remain relatively healthy, consistent with historical trends amid economic downturns. However, performance still appears uneven (e.g., strong Nintendo, slower PS3)."
Sebastian concluded: "Additionally, we note that tough growth [comparisons] are likely to translate into lower industry sales in 1H09, before growth reaccelerates in 2H."]
But that idea, which makes intuitive sense, is completely at odds with recent sales numbers. In reality, video games are selling better than ever. The retailer GameStop announced sales of nearly $3 billion worth of games, hardware, and accessories during the nine weeks around the 2008 holidays 22 percent more than during Christmas 2007.
According to the research firm Media Control GfK, game software accounted for more than half of global packaged entertainment sales in 2008, beating DVD sales for the first time. The firm pegs game sales at $32 billion worldwide. (The U.S. market accounts for around 45 percent of the world total.) The NPD Group, which tracks sales for the industry, also reports that game software sales were up 26 percent in 2008.
So how can publishers lose money amid such incredible sales and record growth? The answer is simple: They're spending more than they're bringing in. Game development budgets have ballooned, and publishers are reeling because they can't keep the costs under control.
