Video gaming retailer GameStop (NYSE:GME) has announced the success of its iPod, iPhone, iPad trade program. [1] The program which was started in September 2011, has proved to be a major growth driver for GameStop during holidays. We expect the trade in program to contribute handsomely to GameStop’s used video game products this quarter. GameStop is a leading retailer of new and used video-gaming products competing with the likes of Wal-Mart(NYSE:WMT), Best Buy (NYSE:BBY) and Amazon (NASDAQ:AMZN)
The Trefis price estimate for GameStop stands at $32.51, which is roughly a 35% upside to the current market price.
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Trade-in program a major growth driver for GameStop’s used video game products
GameStop had started the trade-in program of Apple products in September in order to bolster the growth of used video game products, the division which contributes nearly 50% to GameStop’s annual profits.
The program has been a major company focus over the last three months, with GameStop bringing many attractive offers with the trade-in program. The latest one allowed PowerUp members to pay an extra $50 for the purchase of a new Xbox 360 with Kinect by trading in any iPod Touch, iPhone, or iPad device at its U.S. locations. [2]
While the company hasn’t revealed any numbers yet, we expect the trade-in program to be a major growth driver for GameStop’s used video game products next quarter.
As the company’s margins in used products remaining significantly higher than those of new video game software/hardware, this will positively impact results. As a result, with the increase in contribution of used video game products to GameStop’s net revenues, we expect an increase in GameStop’s gross margins going forward.
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Notes:- GameStop announces the success of its iPod, iPhone, iPad trade-in program, Source: GameStop’s IR [↩]
- GameStop’s latest offering, Source: exophase [↩]
