Collectibles, AT&T stores fueling new growth for GameStop

GameStop is not just about video games anymore.

In three years, the Grapevine-based company has built a new billion-dollar business selling products ranging from smartphones for AT&T to Apple accessories to collectibles like action figures from famous movies and TV shows.

The diversification allowed GameStop to post record profits last year, even as sales of once-core video games declined. And the new revenue streams will allow the consumer electronics retailer to keep growing while digital technology continues to eat into sales of physical video games, executives told a gathering of analysts and investors at the Gaylord Texan on Thursday.

“This is not a transformation that you have to wait for. This is a transformation that is here today,” GameStop CEO Paul Raines said.

The message is one the company has been trying to spread on Wall Street, where skeptical investors have traded down the company’s stock on fears that digital video games, downloaded by consumers at home, will turn the once-highflying chain into the next RadioShack or Blockbuster Video.

GameStop’s leaders say dire predictions about the impact of digital game downloads are unfounded and that the company’s mainline stores have a bright future. The next growth surge may come in October when Sony introduces virtual reality headsets and games for its PS4 system.

John Koller, vice president of marketing for Sony, said the best way to sell virtual reality is to let customers try it. So it will offer demonstrations of its VR system starting in June at GameStop and other sites.

“We will have significant number of stores with demo stations in them,” said Tony Bartel, GameStop’s chief operating officer. “We’re clearly going to be a key launch partner.”

Raines said the GameStop chain has added two $1 billion product categories in recent years: sales of digital content and the line of collectibles, which the company also calls Loot.

Last year, sales of collectibles — toys, T-shirts, statues — topped $300 million, up from $75 million in 2014. This year, those sales are expected to near $500 million and grow to $1 billion by 2019.

The products are sold online, in GameStop stores and at a chain it has created called ThinkGeek. Currently, there are three ThinkGeek stores in the United States, including one at North East Mall in Hurst that opened on Black Friday in November and draws customers inside with statues of Iron Man and the Incredible Hulk.

GameStop plans to open 20 ThinkGeek stores in the U.S. this year, including one in Manhattan in May.

Meanwhile, the company has been rapidly expanding two retail chains it acquired in 2013: Spring Mobile, which operates AT&T Wireless and Cricket prepaid phone stores, and Simply Mac, an authorized dealer for Apple products and accessories in smaller markets.

Spring Mobile has grown from about 200 stores two years ago to more than 900 today by consolidating a fragmented dealer network through more than two dozen acquisitions. Two more deals planned for this year promise to take the company to about 1,500 stores. Simply Mac has expanded from fewer than 10 stores to 76.

Together, these so-called Technology Brands stores are expected to generate about $850 million in sales by year’s end. Last year, the stores generated 25 percent of GameStop’s profit, putting the company on track to reach its goal of 50 percent by 2019. In fiscal 2015, Gamestop reported net income of $402.8 million on sales of $9.36 billion.

Jason Ellis, senior vice president of Technology Brands, said providing strong customer service allows brick-and-mortar stores to thrive in the digital age.

“Technology is complex,” he said. “The reality is that consumers want to see and touch new technology before making a new purchase."

This story was originally published April 14, 2016 at 6:45 PM with the headline "Collectibles, AT&T stores fueling new growth for GameStop."