Gaming consoles sales are still rising and GameStop has nothing but benefits out of the constant trend. GameStop profit exceeds expectations thanks to Microsoft Xbox One and Sony PlayStation 4 robust sales.
The solid recent sales increased GameStop shares’s by 8 percent up to $43.8. On August 2, the company reported a profit of $24.6 million. The result is very satisfying, as for the similar period of 2013, GamoStop managed to produce a profit of only $10.5 million, MarketWatch reports.
The total revenue for the second quarter was $1.73 billion, while the expectations were set at $1.65 billion. For the third quarter GameStop maintains a conservative forecast. GameStop only aims to have a 1 to 5 percent growth.
GameStop benefited from increased hardware sales, as well as software sales. A couple of title like ‘Watch Dogs’ and ‘Mario Kart 8’ helped GameStop achieve a 15.6 percent increase in new software sales, Reuters reports.
Business is going well in the U.S recently. During the second quarter, there has been a rise in productivity levels, while unemployment claims are very low. Consequently, investors are more open to place money in new businesses.
GameStop profit exceeds expectations as hardware sales were strong
However, another important revenue source for GameStop is represented by used games. Customers who want to buy a new game, trade an old game and pay a difference. The only prerequisite for this transaction is for the old game disc to be in usable condition.
The company’s model seems outdated for many investors, Nasdaq claims. Without a proper adaptation to new business models and solutions, along with aggressive expansion, the future might look grim for GameStop. The company can easily go from a profitable enterprise to a dinosaur, because it relies too much on a single revenue producing component. Another aspect regarding the company is that its CEO suffered a brain surgery last week and he is expected to recover in six weeks.
GameStop enhances the trade program as often as possible. However, it faces strong competition from now, because Wal-Mart decided to join the trade-in business. Wal-Mart launched the similar process in March.
But even more importantly, Electronic Arts decided to introduce a subscription service in July. For now, EA offers the service only to Xbox One users. By paying $4.99 per month, they have access to all of EA’s games. GameStop profit exceeds expectations, but investors worry that the trend may stop soon.
