You won't need a strategy guide -- or even a worthy cheat code or two -- to figure out why it's good that Electronics Boutique (NASDAQ:ELBO) saw its earnings dip to $0.11 a share in its April quarter.
Yes, it did fall short of last year's showing, when the company earned $0.12 a share. Then again, EB's latest report also included expenses related to its pending merger with GameStop (NYSE:GME). Absent those one-time costs, earnings would have come in at a healthy $0.15 per share.
Electronics Boutique, a Motley Fool Stock Advisor recommendation, saw its sales soar by 36%. More impressively, comps rose by 14.5%. While software sales grew nicely, the real winner was the hardware side, as consumers snapped up the new Sony PSP handheld gaming device.
That's not the ideal scenario for a video game retailer -- markups are much higher on software titles -- growing a new platform plants the seeds for even greater software purchases down the road as gamers flesh out their game libraries. So don't sweat the dip in gross margins. Investors will be grateful for that in the long run.
Investors could have seen this strong report coming. Earlier this week, GameStop announced a good quarter on a 12% spike in same-store sales.
The combined company will be worth watching. After all, you can take a chance and bet on one console reigning supreme by buying into Nintendo (NASDAQ:NTDOY), Sony (NYSE:SNE), or Microsoft (NASDAQ:MSFT) -- or you can buy the video game retailers and bet on them all. That same logic may apply to software heavies like Electronic Arts (NASDAQ:ERTS) or Take-Two Interactive (NASDAQ:TTWO), since they feed all three leading platforms, but you'd still have to bet on which developer will produce the most hit titles. Buying the video game retailers provides a wider net of coverage -- you know, just in case you don't want to go around memorizing cheat codes or fumbling for a strategy guide.
Press up, up, circle, and x, then check out this related Foolishness:
- GameStop is swallowing Electronics Boutique whole.
- GameStop had a solid quarter, too.
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Longtime Fool contributor Rick Munarriz is very excited about the new Nintendo, Xbox, and PlayStation consoles rolling out in the coming months. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
