How about GameStop [GME] - one of my favorite stocks. I just read that the company recently opened it's 1,000th store overseas. Since its acquistion of EB Games, GME has been on a tear. As of the end of Q1 2007, the Grapevine, Texas-based video game retailer had 4816 which is roughly double the number the company had 18 months prior. And earnings have been breaking records thanks to the boom in video game hardware and software brought on by a new generation of consoles from Microsoft, Sony and Nintendo.
GameStop's overseas footprint falls mostly in Europe, specifically in Italy, Norway, Portugal, Spain, Sweden, Austria, Denmark, Finland, Germany, Great Britain, Ireland, Switzerland, Australia, Guam, New Zealand and Puerto Rico.
Video Gaming is clearly a global business and one of GameStop's main "brick and mortar" competitors in the U.S. is Best Buy [BBY] which has a market cap of $21 billion. That's more than three times greater than GameStop's $6 billion market cap. However apparently electronics retailers like BestBuy dont get the respect on Wall Street that certain specialty retailers like GameStop do. GameStop has a p/e of around 36 while Best Buy's is less than half that.
Best Buy is also eager to expand overseas however it has mostly focused on China. European expansion is glaringly absent. Even though they have very different approaches to retailing ( big box versus mall stores), they both are targeting the same customers. Capital is easy and the urge to merge is becoming more infectious. Would GameStop make a nice acquisition for Best Buy?
GameStop is one of the best pureplays in video gaming. Besides the retail stores, it has a thriving Web commerce operation and a magazine that has over 2.7 million subscribers making it one of the strongest magazine franchise out there. Most of these subscribers have provided GME with their email addressses and they also have affinity bonus cards that bring them back to the stores after weekly emails are sent out advertising deals. GameStop is a clear example of a tradition retailer that is using the Web effectively to improve business. So if another bigger retailer like Best Buy doesn't buy GME, who will? A media company? News Corp [NWS], Interactive Corp [IACI]?
