GameStop Is a Reluctant Dinosaur

• Report this Comment On May 19, 2011, at 5:59 PM, Varchild2008 wrote:

  Having to dole out lots of cash to acquire Spawn Labs and Impulse as well as expenses related to Power up Rewards Program merging all of these acquisitions together....

  That is what brings down the EPS. The share buybacks help bring EPS back up.... But, I wouldn't claim that:

  "GameStop's guidance doesn't include the impact of share repurchases, and it spent $117.7 million during the past quarter alone to zap nearly 6 million shares. In other words, it bought its way to this reiteration."

  What about the fact that if it would have missed its guidance it would be because of the Acquisition Spending and not the overall Comps Growth which (by the way) they never lowered.

  Share buybacks can't be used to boost COMPs.

  COMPs growth guidance never lowered is far more significant than trying to paint the bottom line with a broad share buyback stroke.

  P.S. I thought Gamestop was supposed to have negative COMPs???? When exactly is that going to happen when it appears Gamestop and Microsoft have a very Amicable relationship. Microsoft was the first company to allow Gamestop to sell DLCs on XBOX 360...btw...

  Why say in 1 breath Microsoft has no reason to play fair so they won't...... and then the actual reality in front of you is that Microsoft is playing fair?

  There's no reason for them to allow Gamestop to sell DLCs.......period.......and yet they are!

• Report this Comment On May 19, 2011, at 7:01 PM, memoandstitch wrote:

  The stock closed higher though.

• Report this Comment On May 19, 2011, at 7:47 PM, YLv wrote:

  This does not account for a slow game market. Recently the market has been flooded with sequals and flops, most games falling into both categories. In the meantime, the newest equipment to hit the market was the Nintendo 3DS in April. Once you consider the slow game market it is easy to understand slumping targets. It is quite apparent that Game Stop is the best of the videogame retail market because of the many benefits it can offer as a game exclusive company. In fact, I would say that game stop is to video games as starbucks is to coffee. Sure game stop does not have any control over the quality of entertainment, they are known for standing by their used products. With their game informer magazine and power, their rewards for preordering, and their power up rewards for new purchases, they draw the "elite" gamers and with their buy back policy and low cost of used games they maintain the casual players as well. Game Stop is the place to be regarding marketing your new gaming products and no one else in the market seems to be able to come close. I think as competition inevitably crumbles and Nintendo releases their new console next year we will see better growth projections for Game Stop in the future

• Report this Comment On May 20, 2011, at 2:08 AM, itconsultant wrote:

  Rick,

  Please re-read the press release closely again.

  "Note that earnings guidance only includes the effect of the shares purchased thus far in fiscal 2011 "

  translation: Buybacks till date are factored in guidance. Any future buybacks are not..since they have not taken place yet :)

  Your comment "GameStop's guidance doesn't include the impact of share repurchases,"..Is incorrect :)

• Report this Comment On May 23, 2011, at 3:10 PM, mgallipo wrote:

  itconsultant,

  Unfortunately the language you quote does not necessarily negate Rick's comment. The real question is whether GME's prior guidance included any level of buybacks.

  Let's put some numbers on it to demonstrate. Company XYZ has 100 mm shares outstanding and give guidance of $1.00/share thus implying total net income of $100 mm. At the end of their quarter, they've bought back 5 mm shares (leaving them with 95 mm outstanding) but reiterate guidance of $1.00/share. That guidance now implies earnings of only $95 mm (actually a little over $96 mm since the weighted avg outstanding for the year would be a little over 96 mm, but let's keep it simple). In this case, although guidance remains the same PER SHARE total net income are now lower than previously estimated. However, if the initial guidance included an estimate for buyback activity then Rick's argument would be mistaken. Given that the most recent guidance only includes buybacks completed and no estimate for add'l purchases this year, I would guess that the co's original forecast did not include buyback activity.

  I think some of the confusion was in Rick's choice of verb tense. I would have written it in past tense to say "GME's guidance didn't include...." rather than the present tense "doesn't." Hope that helps :)

Add your comment.