GameStop (GME) Exec: Microsoft's (MSFT) New Xbox One Pricing Scheme is Working

Microsoft (Nasdaq: MSFT) shares are flat Friday amid some positive indicators from retail partner GameStop (NYSE: GME).

After markets closed Thursday, GameStop posted Q1 EPS of $.59, topping estimates looking for $.57. Comps rose 5.8 percent.

On GameStop's quarterly conference call, company president Tony Bartel made some interesting commentary [emphasis will be ours on the following quotes].

Oppenheimer analyst Briand Nagel asked ...how should we think about the recent price actions on Xbox One, is there any read-through to demand for that device?

Bartel said, I definitely think we're already seeing in our stores with our reservation program as well as the dialog to PowerUp Rewards that there's a stronger demand as a result of the price drop. I'm not sure what it's going to do on comps as you weigh the mix towards the lower priced SKU and lower price point, but the good news for us is, it sells more units, we'll sell a lot more units because like we shared earlier, we're driving a lot of the growth and that means that there will be more units out there to put software on.

Needham & Company's Sean McGowan also asked, Now that you've seen that price move by Microsoft, have you seen any kind of lift just since that's been announced, and just generally, what you're seeing about, after that initial purchase, is there a little bit of a delay in when they buy additional peripherals or software or is it happening pretty quickly?

Bartel responded, We haven't seen the impact of the price drop obviously ... second week of June, but people – obviously there's been more traffic into our stores as a result of as people come in to reserve it, and so we're excited about the reserves that we're seeing on that. And actually we've seen a slight uptick in the sale of Xbox One as well. And so, in terms of the purchase behavior, I would say that it is probably more launch driven at this point. So for instance next week where we have Watch Dogs launching, that is a very – we're very pleased with the pre-orders, they've exceeded our expectations. So what we see is, when there is innovation like that, that's where we really see a lot of traffic in our stores. So clearly if the installed base grows, you're just going to see that expand.

Announced last week, Microsoft's new Xbox One pricing appears to be having a positive impact on sales.

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