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Gamestop CEO Paul Raines on the next generation of video game consoles as well as the company’s expected growth in digital sales.
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GameStop matching EPS estimates for the fourth quarter of this morning but.
The company falls short.
On revenues the stock is falling today even as the company plans a push for digital and used game sales stock is down 145 almost 6% 2322.
Joining me now for a Fox Business exclusive interview from Dallas Texas -- -- He is -- stops.
CEO.
Let's look at the numbers here the actual was 1783.
Yes and at once and if Britney met there but the revenue came in a little bit light what he's -- -- the analyst community.
Sure fairly out today is -- -- market reaction has been a little bit of -- head -- for us but you know and talking to some of -- more experienced investors today -- Who love who we know weld said you know sometimes if you don't know the category if you don't know video games and particularly if you haven't followed GameStop strategy the hardware cycle is at the end of the current generation of Xbox is -- PS3 so.
Our profitability has been driven by our pre -- games and our 57%.
Digital growth.
And that hardware store decline has affected our top line until we see the next generation.
But we're excited about our plan and the good news as we presented that today and we've got an exciting digital -- -- story and we added a mobile category today to our bustle trade business and we announced a 150 to 200 -- dollar target.
And -- pre owned mobile and new tablets of business for this year related gains so we like our plan and are working hard to do a lot -- -- there was investors and.
-- revenues and then you brought that up the analysts of course Hampshire did point out to you today as you're just pointed out that yes the hardware.
The games of themselves are gonna be everything's gonna be gone digital and drives are gonna be going away by 2014.
Your revenue target for digital.
Is one point five.
Billion but that's only be 13% of projected sales I mean do you think they need to -- -- move.
Maybe more towards the digital line you think that's one of the reasons that investors -- -- a little harsh on the stock today harsh on the company.
Well I think -- misconception is as you said that consoles are gonna go away they're not you know Sony Microsoft and Nintendo.
As well of their hand held products are some of the largest installed bases in the world and they're not gonna go away and in fact.
We are expecting a new console life.
From all three players a Nintendo has already announced one for this year.
So there will be new consoles in the software business will right along with that like razors and razor -- so.
We are moving aggressively and digital add ons for console business and that's -- well but.
I will tell you in the aggregate -- if you look at it.
Our model is his growing our sales and top line by -- five to 6% figure generating a lot of free cash flow so.
We like our projections and think that it will be a physical business plus a digital this is very much of -- hybrid model.
Well let me ask you doesn't care if it just makes you nervous 40% your float is short ahead.
That's pretty high I mean are you a little bit nervous that you're really being bet against here by the market.
Well of course we are and it's so very important subject for -- that we're trying to deal with -- -- we can mostly -- educating.
Investors you know over the past.
Three years our top fifteen investors have grown their holdings of -- but we still have.
A significant amount of investors out there shorting the stock largely due to -- perception around the console business so.
It does make us nervous but it doesn't slow -- down on our commitment to driving the strategy that we have that is working by the way.
We made our consensus number for 2011.
-- of two dollars and 87 cents we've executed on -- plan for three years we've bought back 2122%.
Of our of our shares in the last three years.
And we just got another authorization for a buyback this year so we're not going away and okay pretty confident our strategy and of the.
Did ask you how aggressive they're gonna be with the buyback -- just answered my question a couple of my thanks a -- wanna ask you about the up.
Yet you're fewer clothes a 150 stores but -- opening up a hundred stores you've also got your main competitor in Europe -- just went bankrupt I'm curious.
If you're seeing if you're gonna cut up you know go into the European market a little heavily.
What about these new stores the -- closing -- kind of is a little bit confusing I guess as to what your strategy is here with the stores they're property.
Our.
Well we've said today we repeated our our guidance on that we've been consolidating our square footage footprint for about one by about 1% a year.
And the -- we do that is because we have a very sophisticated.
A loyalty program called power rewards it has seventeen million members and it allows us to find where customers shop.
And we can give them incentives and invite them to shot.
In consolidated stores so where we have maybe a mall store -- -- strip center outside it we can consolidate that and it's very productive for consumers as wells for us.
So that's what's driving at the new store growth that we have which is great is in towns that don't have a GameStop.
And there's no GameStop for fifteen or twenty miles those are great locations for -- and we like that strategy but as far as Europe.
We're very different we're very successful in Europe a matter fact.
We are disclosed today on our call that are French and Italian businesses had great years of operating earnings growth and they have some of the highest operating margins in the world well.
Europeans probably -- stress relief that could certainly be -- -- -- -- -- -- and a -- that's a lot of strides are overdue Bahrain into the CEO of GameStop live from Dallas Texas good to see you again thank you -- Thank you Sheryl power -- the.
