GameStop, Meet Goliath | $WMT $GME

Takeaway: The reality is that the used game route is a tough business, and one that takes awhile to get right.

Editor's Note: This is a complimentary research excerpt from Retail Sector Head Brian McGough. For more information on our services, click here.


Newest Player in Used Videogames: Wal-Mart


GameStop, Meet Goliath | $WMT $GME - 1109 Walmart full 600

  • "Wal-Mart Stores Inc. is making a play for the used videogame business, a move that could bring in new customers while rankling GameStop Corp., which has long dominated the market."
  • "Starting next week, the world's largest retailer will allow shoppers to trade in used videogames for anything from groceries to gadgets across 3,100 of its stores. Customers will receive gift cards ranging from a few dollars to more than $35, based on the value of the games they turn in. Those cards can be redeemed in stores and online."
  • "Wal-Mart itself ran a smaller trade-in program in 2009 where it allowed customers to sell used games through kiosks in certain stores, but the retailer failed to make it work. This time, Wal-Mart has teamed up with CExchange Inc., an electronic trade-in and recycling company based in Carrollton, Texas, which also works with RadioShack Corp. and eBay Inc."

Takeaway from Hedgeye’s Brian McGough:

We have to give Wal-Mart credit for going the used game route. Honestly, they could prove disruptive to GameStop…to an extent.


The reality is that it’s a tough business to sell used games. It even took GameStop a very long time to get it right.


It’s just simply harder to manage inventory in this category than almost any other in retail.


Really, there's no way Wal-Mart can do it as well as GameStop.

One of the key reasons is that you need consistent volume of gamers that view your store as a source for the content that they want.  GameStop has that steady flow of traffic -- it is the destination for gamers. And it was only after it established itself as the “Mecca for Video Games” could it build a used game business.


Point blank, this all seems too premature for Wal-Mart.



Takeaway: In advance of our 3/24 Black Book, we review our prior survey on buying patterns vs a yr-ago for Yoga brands. Can LULU can get much worse?

Here's the second note in a series of five in advance of our LULU Consumer Survey results on Monday March 24th at 11am ET.  When we polled consumers three months ago, we pulled away some clear insights. The concerns largely outweighed the strengths, which foreshadowed the company's results, and ultimately the stock price.


We're re-running our survey to gauge the incremental change over the past quarter, with the goal of seeing whether LULU is making progress (which could get us more constructive on the name) or not.


In preparation for 'Round 2' we want to offer up some of the notable takeaways from our last survey, as they'll be framing the discussion on Monday.




In this question, we asked consumers if they are buying more or less than a year ago. Now…we're the first to admit that we don't like this question very much. The reality is that the average consumer does not know how much she was buying a year ago. But, at least the question is consistent across brands, which is good enough for us. In our next survey, we'll see the rate of change by brand, which we think strengthens the question further.


The first chart shows the percent of women who said that they are buying MORE product than they were a year ago. Winners are Sweaty Betty, Zella (Nordstrom), Ideology (Macy's) and Prana.  Losers are Lululemon, Old Navy and AdiBok.


The second chart shows the percent of women who said that they are buying LESS of each brand versus a year ago.  Roxy scored poorly, but the company is literally just starting its Yoga brand now (it is probably unfair to even have it on the list). Then comes LULU, Puma and Adidas.  Most other brands scored respectably with 13% or less buying a smaller amount of the brand today versus a year ago. Check out Sweaty Betty and Zella (JWN) -- truly solid brand momentum.





Continuing with the 'buying more or less' theme, we thought it would be interesting to stack up our Yoga results vs what we learned when we did this for prior surveys in different categories.  We're talking different consumer groups and different income levels in each survey. But the trends are noteworthy nonetheless.  Department stores naturally trailed the pack with far more people 'buying less' than 'buying more'. Then comes Action Sports with a positive trend, followed by Yoga which puts the rest of the categories to shame.  The results of this question won't make or break our thesis -- or decision to potentially change it. But it will give us an indication as to whether the category is getting even stronger or is easing on the margin. 


LULU: SURVEY RESULTS PREQUEL #2 - category buyingmore

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Chain Store Sales: Hoping Against Hope

Takeaway: After this week's drift downwards, we're hoping to see trends accelerate.

Editor's Note: This is a complimentary research excerpt from Retail Sector Head Brian McGough. For more information on our services, click here.


ICSC - Chain Store Sales Index


Chain Store Sales: Hoping Against Hope - tumblr mp0b65iLOx1r6f15co1 1280 


The latest International Council of Shopping Centers (ICSC)-Goldman Sachs weekly index, which measures nominal same-store or comparable-store sales excluding restaurant and vehicle demand, has been released. The weekly index statistically represents industry sales and is not just a sum of sales for a handful of retailers.


What we see is not a disaster by any means, but last week's positive +2.1% reading gave us a glimmer of hope. This week, though, we drifted back down to just +1.5%.


Keep in mind, as outlined in the chart below, that we're about to go against a 10-week run last year where sales growth was well below 2012 levels. In other words, we have an easy comp.


We hope we'll see trends accelerate…but we hate relying on hope.


 Chain Store Sales: Hoping Against Hope - chart2 3 18 large

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