Is GameStop's Collectibles Segment the Future of Its Growth Strategy?

GameStop Corp.’s GME collectibles segment stood out as the strongest performer in the first quarter of fiscal 2025, highlighting growing consumer engagement beyond traditional gaming products. Net sales from collectibles reached $211.5 million, up significantly from $136.8 million in the first quarter of fiscal 2024. This represents a 54.6% year-over-year increase. Total company revenues declined over the same period.

The share of collectibles in GameStop’s overall sales mix increased a remarkable 28.9% of total net sales compared with 15.5% a year earlier. This demonstrates a meaningful diversification of the company’s revenue base, reducing its dependence on the more cyclical and declining hardware and software segments, which saw year-over-year sales declines.

The collectibles category comprises apparel, toys, trading cards, gadgets, and other pop culture and technology-themed merchandise, appealing to a broader demographic of customers beyond just gamers. The sharp growth in this segment indicates that GameStop’s merchandising strategies are successfully aligned with broader pop culture and lifestyle trends that resonate with its target audience.

This strong performance implies the company’s ability to anticipate and react to shifts in consumer preferences, which it identified as a key risk factor in forward-looking statements. At a time when hardware and software sales fell 31.7% and 26.7%, respectively, year over year, collectibles provided much-needed top-line momentum and a strategic hedge against industry headwinds. By tapping into lifestyle and cultural trends, the company is successfully broadening its appeal and creating new avenues for growth, reinforcing relevance in a rapidly changing retail landscape.

GME’s Price Performance, Valuation & Estimates

Shares of GameStop have lost 27.8% year to date against the industry’s growth of 13.3%. 

GME has underperformed its competitors, including Best Buy Co., Inc. BBY and Microsoft Corporation MSFT. Shares of Best Buy have declined 17.8%, while shares of Microsoft have risen 18% over the same period.

From a valuation standpoint, GME trades at a forward price-to-sales ratio of 3.06X, slightly below the industry’s average of 3.58X. It has a Value Score of B. GameStop is trading at a premium to Best Buy (with a forward 12-month P/S ratio of 0.36X) and at a discount to Microsoft (11.76X).

The Zacks Consensus Estimate for GME’s fiscal 2025 earnings implies year-over-year growth of 127.3% and the same for fiscal 2026 indicates a decline of 52%. Estimates for fiscal 2025 and 2026 have been upbound 28 cents and southbound 11 cents, respectively, in the past 30 days.

GME currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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