GameStop to ramp up expansion of wireless, Apple product stores
04/22/2014 5:43 PM
04/22/2014 5:44 PM
GameStop plans to accelerate its expansion outside of video games into wireless and other consumer electronics retailing by adding up to 400 AT&T-branded stores this year and 23 Simply Mac stores that sell Apple products, top executives said Tuesday.
The Grapevine-based retailer, known for its sprawling network of video game stores, diversified last year by buying two small chains: Spring Mobile, which sells AT&T products, and Simply Mac, an authorized Apple product dealer in markets too small for an Apple Store, such as Lubbock.
During an investor presentation titled “Beyond the Game,” Chief Financial Officer Rob Lloyd said GameStop will invest up to $140 million this year to expand the chains by acquiring existing stores or building new ones.
It wants to add 200 to 250 AT&T stores to the Spring Mobile chain, plus 100 to 150 Cricket stores, which sell AT&T’s prepaid phone services, he told about 60 investment analysts at the Omni Mandalay Hotel in Las Colinas.
The “transformation,” as CEO Paul Raines dubbed it, is intended to keep GameStop growing and leverage its expertise in store operations and buying and selling used devices. He said he envisions GameStop as a “family of specialty retailers that make your favorite technologies affordable and simple.”
The diversification comes as GameStop has geared up for the next cycle of growth in its core video game market, spurred by last year’s introduction of Sony’s PlayStation 4 and Microsoft’s Xbox One consoles.
The company has forecast overall sales to grow 8 to 14 percent in fiscal 2014 and earnings per share to rise to $3.40 to $3.70, from $3.01 last year, when profits were squeezed by higher sales of lower-margin gaming consoles.
“We are in the sweet spot of the industry and focused on winning this cycle,” Raines said.
At the same time, the company continues to consolidate its huge base of more than 6,400 GameStop stores, with plans to trim 120 to 130 this year. The company employs about 2,400 people in Grapevine at its corporate headquarters and a refurbishment center, where it overhauls and repairs used devices.
Lloyd projected that its new set of “technology brands,” which counted less than 220 stores at the end of January, could reach 1,000 stores with revenue exceeding $1 billion and perhaps reach 10 percent of corporate revenue by the end of 2016.
Last year, the small chains contributed just $62 million of the company’s $9 billion in revenue. That’s projected to grow to $375 million to $425 million this year.
Raines said GameStop’s confidence in rapid growth at the small chains, acquired for about $110 million last year, is buoyed by their strong ties to industry leaders AT&T and Apple.
Steve Bain and Jason Ellis, the executives who built Simply Mac and Spring Mobile, continue to run the operations for GameStop and see strong growth opportunities. After opening 23 stores this year, Bain said, the company plans to open 50 more Simply Mac stores in 2015.
And in the eight months after the acquisition by GameStop, Ellis completed 12 deals in the highly fragmented market of AT&T dealerships, doubling the size of the Spring Mobile business.
“GameStop allows us to scale up quickly,” he said.
GameStop’s highly successful PowerUp Rewards program provides a huge base of potential customers. Launched in 2010, the program now has 27 million members who receive email marketing for the new stores, said Mike Hogan, a GameStop executive vice president.