GameStop Gains From Collectibles Business Despite Soft Comps

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Robust collectibles business and expansion plans drive GameStop (GME) amid soft comps and margins.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="GameStop Corp. GME is gaining from robust collectibles business and expansion plans for a while. Moreover, shares of this video game retailer gathered momentum, post its buyout talks. These factors may be cited as reasons behind the company’s decent run on the bourses. Notably, shares of this Zacks Rank #3 (Hold) company have gained 10.4% in the past six months, outperforming the industry’s rise of 5.2%. Analysts also believe that the stock has upside potential as apparent from its VGM score of A.” data-reactid=”31″>GameStop Corp. GME is gaining from robust collectibles business and expansion plans for a while. Moreover, shares of this video game retailer gathered momentum, post its buyout talks. These factors may be cited as reasons behind the company’s decent run on the bourses. Notably, shares of this Zacks Rank #3 (Hold) company have gained 10.4% in the past six months, outperforming the industry’s rise of 5.2%. Analysts also believe that the stock has upside potential as apparent from its VGM score of A.

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GameStop has been witnessing a rise in sales of collectibles for quite some time now, driven by continued expansion of licensed merchandise offerings and unique product offerings. In second-quarter fiscal 2018, sales of collectibles rose 15.7% following an increase of 24.4% in the first quarter, as well as a respective rise of 22.8% and 26.5% in the fourth and third quarter of fiscal 2017. Further, strong growth in apparel aided the performance. Management also expects this segment to become a $1-billion business by the end of fiscal 2019.

The company gained momentum, following exploratory talks related to a potential transaction. The video game retailer might be holding discussions with private equity firms like Sycamore Partners. However, management earlier stated that there is no guarantee of any deal after these discussions.

GameStop remains on track with its expansion plans and is gradually evolving as a mixed retailer of physical and digital gaming as well as electronics products. The company’s venture into digital, iDevice and gaming tablet businesses would be accretive. Also, GameStop’s buy-sell-trade model of selling new games and buying back used games, and the PowerUp Rewards program have made it a popular destination for shoppers. The company’s partnership with AT&T, pre-owned trade capabilities and solid omni-channel presence are also encouraging.

However, the company’s Technology Brands has been witnessing dismal sales since the past few quarters due to store closures. Also, net sales declined year over year in second-quarter fiscal 2018, while comparable sales declined 0.5%. Further, management continues to expect fiscal 2018 sales to decline 2-6% and comparable store sales to be flat to down 5%. Moreover, margins have been contracting for a while now and persistence of this trend might pose a concern.

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GameStop has been witnessing a rise in sales of collectibles for quite some time now, driven by continued expansion of licensed merchandise offerings and unique product offerings. In second-quarter fiscal 2018, sales of collectibles rose 15.7% following an increase of 24.4% in the first quarter, as well as a respective rise of 22.8% and 26.5% in the fourth and third quarter of fiscal 2017. Further, strong growth in apparel aided the performance. Management also expects this segment to become a $1-billion business by the end of fiscal 2019.

The company gained momentum, following exploratory talks related to a potential transaction. The video game retailer might be holding discussions with private equity firms like Sycamore Partners. However, management earlier stated that there is no guarantee of any deal after these discussions.

GameStop remains on track with its expansion plans and is gradually evolving as a mixed retailer of physical and digital gaming as well as electronics products. The company’s venture into digital, iDevice and gaming tablet businesses would be accretive. Also, GameStop’s buy-sell-trade model of selling new games and buying back used games, and the PowerUp Rewards program have made it a popular destination for shoppers. The company’s partnership with AT&T, pre-owned trade capabilities and solid omni-channel presence are also encouraging.

However, the company’s Technology Brands has been witnessing dismal sales since the past few quarters due to store closures. Also, net sales declined year over year in second-quarter fiscal 2018, while comparable sales declined 0.5%. Further, management continues to expect fiscal 2018 sales to decline 2-6% and comparable store sales to be flat to down 5%. Moreover, margins have been contracting for a while now and persistence of this trend might pose a concern.

3 Retails Stocks to Bank On

Conn’s, Inc CONN has a long-term earnings growth rate of 23% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings BOOT has a long-term earnings growth rate of 23% and a Zacks Rank #1.

DSW, Inc. DSW has a long-term earnings growth rate of 9% and a Zacks Rank #1.

Today’s Stocks from Zacks’ Hottest Strategies

It’s hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 – 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we’re willing to share their latest stocks with you without cost or obligation.

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Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
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