This summary is based on the first quarter fiscal 2008 earnings call conducted by GameStop Corp. (GME: chart) on May 22, 2008.

Management:

- Chairman, Chief Executive Officer: Dick Fontaine
- Chief Financial Officer: David Carlson
- Vice Chairman, Chief Operating Officer: Dan DeMatteo

Key Investors Issues

- Sales increased 42% to $1.8 billion from $1.3 billion in the prior year.
- Net earnings were $62.1 million or 37 cents a share, up 151%.
- The firm retired $30 million of debt in accordance with the debt buyback program.

First Quarter Highlights

Sales rose 42% to $1.8 billion from $1.3 billion in 2007, as comparable store sales rose 27% with North American comps over 30% and Australian and European comps in the low double digits, comping against the launch of PS3 in 2007.

- These results were driven by exceptional results across all categories with new hardware sales growing 21% with all platforms meeting or exceeding expectations.
- New video game software grew 72% driven by such blockbuster titles as Grand Theft Auto IV, with only five days of sales in the quarter, Super Smash Bros. Brawl and Rainbow Six Vegas II.
- This compares to NPD software growth of 59%, showing the firm gained significant market share.
- Used video game sales grew by over 27%, as the current economic environment and great new titles stimulated trade ins and budget conscious customers continued to discover the value pricing of our used mix.

Net earnings were $62.1 million or 37 cents a share, increasing 151% over the prior year quarter’s net earnings of $24.7 million or 16 cents a share due to revenue growth

- Gross margins decreased about 120 basis points due primarily to product mix.
- SG&A expenses were leveraged by 200 basis points due to strong sales comps, cost controls and international growth leverage, allowing operating margins to increase 140 basis points to 6.1%.
- The firm had over $625 million in cash at the end of the quarter and inventories grew only 25% on a 42% sales growth rate.
- The firm retired $30 million of debt in accordance with the debt buyback program approved by the Board of Directors in early February, leaving $100 million in the buyback program.

Strategic Insights:

- Deeper in the power and the pull of the games is continuing to attract an increasing number of core and avid gamers purchasing games like Super Smash Bros. Brawl, GTA IV, Army of Two and purchasing these titles in record numbers.
- As the average age of the gamer has surpassed 30, great games to continue to attract long time gamers and the cycle is also going to be much longer.
- Recently, three of the top 20 titles were for PlayStation 2, in its eighth year and given the computing power of the PlayStation 3 and the 360, the firm expects seeing a longer life as developers use these systems in more creative applications into the future.

The company is also seeing expanding demographics, particularly with more females and families discovering the entertainment value of gaming.

- More products, more customer choices and the need for more informed sales associates all play into GameStop’s model and GameStop’s strength.
- Given the innumerable product choices with an ever increasing number of add on and accessory items, GameStop currently stocks over 4,500 SKUs.
- Sales per square foot increased by over 27%, SG&A has been reduced by 200 basis points and the inventory productivity in both new and used products has never been better.

The firm will continue to invest in system enhancements, distribution improvements, merchandising refinements and more customer centered scheduling for the store personnel.

- Trades in used, while strong, grew by 27%, are relatively in balance with this tremendous growth and are achieving and slightly exceeding expectations.
- During the quarter, the company opened 210 stores, 87 stores in Europe, 86 in the US, 25 in Canada and 12 in Australia.

Operational Outlook:

- Game sales for the rest of the year will be propelled by a broad genre of titles for an ever expanding gamer group.
- The firm expects game sales to continue to grow for the year across many platforms such as Guitar Hero Aerosmith for all platforms, and Wii Fit for the Wii again an application for the Wii that is expanding video gaming.

Other titles expected to do well include Metal Gear Solid for the PS3, Gears of War II for the Xbox 360, Madden for all platforms and Guitar Hero On Tour for the Nintendo DS handheld, the first version of Guitar Hero on a handheld.

- In the quarter, the company converted to a new internet ecommerce site that had been in development for several years that is easier to use, provides more game content and will soon allow customers to reserve online and pickup in store.
- The Game Informer Magazine is the largest of its kind in the world with now over 3.4 million subscribers and it just launched an Italian version two months ago.