1.SWOT Analysis:
Strengths: World’s larger video game retailer, 4,490 stores world wide, Game Informer magazine, gamestop.com, trade-in process (large margins)
Weaknesses: no way (yet) to combat digitally delivered games
Opportunities: Video game industry is large, some “devoted” customers, expansion
Threats: Used video game retailers, box store retailers, rental-based stores, online purchase sites, online rental sites, social network gaming, digitally delivered games
2. Review of Financials(2002-2007):
Significant Trends: The biggest trend with Gamestop’s financials is that they have grown consistently ever year between 2002-2011. I think that is has to be contributed to their solid trade-in process model and their global expansion.
Comparing 2007 to 2011: When comparing 2007 to 2011 the main thing we see is that they more than doubled their sales from 2007 in 2011. Not only that but they grew in virtually ever category covered on the financial growth outlook sheet.
3. 2007-2011 Financial Ratios:
2007: Current Ratio – 1.30 Cash Ratio – 0.50 Net Profit Margin – 14%
2008: Current Ratio – 1.33 Cash Ratio – 0.55 Net Profit Margin – 14%
2009: Current Ratio – 1.36 Cash Ratio – 0.61 Net Profit Margin – 14%
2010: Current Ratio – 1.40 Cash Ratio – 0.67 Net Profit Margin – 14%
2011: Current Ratio – 1.43 Cash Ratio – 0.73 Net Profit Margin – 14%
4. Stock Analysis:
Current Price: 23.15
52 Week High/Low: 23.57 – 22.90
Beta: 0.98
5. Gamestop Leveraging the Sport Industry: Gamestop can leverage in the sport industry in a couple of different ways. People who are big fans of sport are usual also fans of the corresponding sport video games. Gamestop should really look into marketing these people by sponsoring various sporting events and advertising on stations such as ESPN. Hosting tournaments at their stores for new games releases for games such as Madden 13 will not only create buzz about their stores and bring people in but also keep those same people out of box retail stores such as Wal-Mart.
6. Next Big Thing: I think the next big thing for Gamestop should be online game rentals. This would be set up like other companies such as GameFly and Rent Zero. These sites allow you to rent a game from the company for a certain amount of time, send it back, and receive another game. These kinds of services are growing in popularity and would be a great opportunity for Gamestop to combat one of its biggest threats. Since gamestop already has their established gamestop.com website, this could be a simple and lucrative transition for them.
7. 2012-2015 Financial Forecasts:
With Next Big Thing: If Gamestop was to develop an online game rental system I think they company’s financials would continue to grow even more than it already is. The first few years might not see too much growth as they attempt to establish themselves in this area but once they do that the sky is the limit for Gamestop. Huge growths in profit could be seen for them.
Without Next Big Thing: Even if Gamestop continues to do exactly what they are, I see no reason why they would not continue to have the steady growth that they have seen for a decade now. The biggest threat to this has to be the fact that you can digitally download a lot of games straight to your console. Only time will tell if that will have a big enough impact to stunt Gamestop’s growth.
8. $1,000 to Invest: If I had a $1,000 dollars to invest in Gamestop, I would not. I say this because I would fear that the continued development of digital download gaming (XBOX live, PlayStation Network) will eventually impact Gamestop too greatly. Gamestop has done a great job sustaining their trade-in process model and has had success in the past but I simply would not be comfortable putting that kind of money in the company. I would, however, consider investing a smaller amount of money, especially because they have a beta below zero making it a safe investment.
swpeac01 