GameStop targeting pop culture geeks with new stores

Looking to diversify as the video game industry changes, GameStop (GME) is experimenting with standalone stores targeting pop culture geeks who love comic-book superheroes, “Star Wars,” “Game of Thrones” and other entertainment franchises.

On Black Friday, GameStop is set to open its third ThinkGeek retail store. It opened its first in Orlando, Fla., on Sept. 25 and a second in Nyack, N.Y., last week. The third will be in Hurst, Texas.

GameStop acquired ThinkGeek, an online purveyor of geek gear and collectibles, on July 17 when it bought its parent company Geeknet for $140 million.

ThinkGeek sells such items as an R2-D2 mini fridge, a Dancing Groot vinyl pop figurine, a “Back to the Future” Flux Capacitor wristwatch and a “Game of Thrones” hoodie with the slogan “Winter is coming.”

GameStop Chief Financial Officer Rob Lloyd told IBD that the company is pleased with the performance of the ThinkGeek stores so far. The Grapevine, Texas-based company is taking a cautious approach to rolling out ThinkGeek stores as it tests the formula, he said.

GameStop operates similarly themed Zing Pop Culture stores in nearly 30 locations in Australia. GameStop also recently began opening Zing Pop Culture stores in Europe.

In addition, GameStop has been expanding shelf space within its video game shops for collectibles and other pop culture “loot.”

Star Wars products are going to be the biggest driver in the category this year, Lloyd said.

“With the movie launch and the game launch this year, we expect the No. 1 category inside collectibles to be Star Wars,” he said.

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GameStop said its collectibles business is on track to generate $300 million in sales this year.

GameStop also is rapidly growing its consumer electronics businesses. GameStop exited its fiscal Q3, which ended Oct. 31, with 834 technology stores, up 104% from a year earlier. They include Simply Mac stores, which sell Apple (AAPL) products, and Spring Mobile stores, which sell AT&T (T) wireless services and products.

For now, video game products rule the roost at GameStop. Video game hardware, software and accessories sales accounted for 85% of GameStop’s Q3 revenue.

But GameStop on Monday missed Wall Street’s Q3 sales and earnings targets as digital downloads took a bigger bite of physical game software sales. It also guided lower for the holiday sales quarter.

Benchmark analyst Mike Hickey said the consumer shift to digital downloads will continue to hurt GameStop.

“The disruptive nature of digital distribution and the devastation previous digital media transitions (have) caused on physical retailers in the music, movie and book media segments can’t be ignored,” Hickey said in a note Tuesday. He rates GameStop stock as sell.

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