Video-game retailer GameStop Corp. (GME), which is grappling with lower sales at its core video games business, plans to expand its Technology Brands segment that provides growth opportunities in the consumer electronics and wireless markets. The Technology Brands segment includes stores that sell AT&T wireless plans and Apple products.
GameStop said that in 2015, it expects to open about 350 to 550 more stores in the Technology Brands segment, while reducing its video-game store count by about 3 percent. The company operates more than 6,600 stores across 14 countries.
Grapevine, Texas-based GameStop announced the new strategy on Thursday, while reporting disappointing results for the fourth quarter and weak outlook for the first quarter as well as fiscal 2015.
GameStop reported an 11 percent increase in profit for the fourth quarter from last year,while sales declined 6 percent. Results for the quarter missed analysts' expectations.
The decline in GameStop's fourth-quarter sales reflects a decrease in new hardware sales that more than offset growth in mobile and consumer electronics as well as new software sales.
Same-store sales for the quarter declined 1.8 percent, including a 1.4 percent decline in the U.S. and a 2.6 percent decline internationally, primarily due to overlapping the launch of Sony's PlayStation 4 and Microsoft's Xbox One in November 2013.
However, GameStop noted that its Technology Brands segment exceeded expectations, contributing 5 percent to its operating income and to its gross margin of 29.9 percent in fiscal 2014, helped by an expansion in the footprint of the company's AT&T wireless and Apple retail businesses.
The Technology Brands segment includes Simply Mac, Spring Mobile and Cricket stores. Simply Mac operates 60 stores, selling the full line of Apple products, including laptops, tablets, and smartphones and offering Apple certified warranty and repair services.
Spring Mobile sells post-paid AT&T services and wireless products through its 361 AT&T branded stores. Cricket Wireless, which operates 63 stores in select markets throughout the U.S., offers pre-paid wireless services, devices and related accessories.
In February, Spring Mobile won an auction for the right to take 163 leases over from bankrupt electronics retailer RadioShack Corp. GameStop has about two months to decide if it will take on the obligation of the RadioShack leases or terminate the lease.
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