Earnings Call: Q1 2010

May 20, 2010

Welcome to GameStop Corporation's First Quarter 20 10 Earnings Conference Call. Today's call is being recorded. At the conclusion of the announcement, a question and answer session will be conducted electronically. I would like to remind you that this call is covered by the Safe Harbor disclosure contained in GameStop's public documents and its property of GameStop. It is not for rebroadcast or use by any other party without the prior written consent of GameStop. At this time, I'd like turn the call over to Dan DiMatteo, Chief Executive Officer of GameStop Corporation. Please go ahead, sir. Thank you, and good morning, and thanks for attending today's conference call. With me today are Paul Raines, our Chief Operating Officer Tony Bartel, our Executive VP of Merchandising and Marketing Mike Mahler, our EVP, International and Rob Lloyd, our Senior VP of Accounting and Acting CFO. As we reported today, we had a great quarter and reported record sales and earnings for Q1. Sales for the first time in a non holiday quarter exceeded $2,000,000,000 as we gained significant market share on new releases during the quarter due to our innovative new release marketing. Paul will give you more color on that later. Our earnings came in at the high end of expectation and in absolute dollars were at an all time high. And as we mentioned in the release, Q1 earnings have grown at a compound rate of 62% over the last 4 years, truly amazing. And Rob will give you more detail on the financials. Lastly, we made great progress on our strategic initiatives relating to DLC sales, loyalty program development and browser game marketing, which will be discussed later. That being said, there's a great deal of concern over the health of the industry given the April NPD data. Even as our software sales grew 13% in the quarter, industry software sales for the Q1 were not as strong as last year's due to a weaker catalog compared to last year when Mario Kart, Wii Fit and Wii Play continued to sell through in significant numbers. Now in our Q2, we expect U. S. Software to be down slightly based on our internal growth expectations and title release schedule. On a month by month basis, we expect new video game software to be up in May due to releases like Red Dead Redemption, which is doing extremely well UFC and Super Mario Galaxy, followed by a decline in June July, excluding StarCraft II as it will fall into the PC Software category. But if you added the 2 categories together, PC Software and Video Game Software, we believe that the industry and the U. S. Will show software growth for the quarter. Based on this analysis, we expect earnings to grow in the quarter 9% to 17%. Moving on to Q3, we expect to see double digit growth beginning with the release of Halo Reach, followed by Medal of Honor, Fallout New Vegas, Madden NFL 2011, Star Wars, Dead Rising 2 and True Crime. Based on the anticipated strength of these titles, we expect earnings to grow in Q3 by 19% to 28% over last year. And at E3, we will be reviewing titles for Microsoft Natal and Sony's move as we have nothing in our forecast for them. All in all, we expect software sales in the U. S. To grow this year and are holding to our full year guidance of $258,000,000 to suit $68,000,000 a 14% to 18% increase over fiscal 2,009. While some may be concerned about our used sale growth of 4%, it should be noted that these sales are on top of 32 percent used growth in Q1 last year. Indeed, our used sales have grown at a compound annual growth rate of 22% over the last 4 years. So to expect this same toric growth to continue is unreasonable. We will see growth in used this year. It will be more likely to be in the single digit range, driven by expansion in less developed markets outside of the U. S. There have been some questions concerning 1st user only content and the effect on our used business. We have not seen an impact thus far and as a matter of fact, we will turn this into a positive with our ability to sell DLC through our investments made in technology to market and sell this content in our stores. Paul will elaborate more on that later. This morning, Walmart announced a more aggressive e commerce initiative to reserve new video games. This is an obvious attempt to increase the 1st week market share, which we dominate. Indeed, many titles we have 60% to 70% 1st week share. We believe our pre release marketing, exclusive content and the immediate currency provided by our trade in program allow us to continue to gain market share as it has for the last few years. In addition, the profile of the hardcore gamer often identifies a credit card less consumer that has purchasing online. So next Rob will review with you the financials in more detail, then Paul will discuss the state of the business. And lastly, we will hold a question and answer session for those issues we have not addressed. Rob? Thank you, Dan. Good morning, everyone. This morning, we announced our financial results for the Q1 of 2010. Total sales increased 5.1 percent to $2,080,000,000 driven by new software sales growth of 13% on the strength of several new title releases, which Paul will cover. GameStop gained 500 basis points of new software market share over the prior year quarter. Net earnings were $75,200,000 and diluted earnings per share for the quarter were $0.48 which was at the high end of the guidance. Comparable store sales came in at the midpoint of guidance declining 1.6%, primarily due to the supply constraint on new video game consoles throughout the quarter and due to reduced hardware price points. These factors led to a decline in new hardware sales of 12% during the Q1. We continue to deal with product shortages on the Sony PlayStation 3. On a unit basis, Xbox 360 and Sony PS3 showed year over year quarterly growth, while the Nintendo Wii and DS were down. As Dan mentioned, used product sales increased 4% positively lapping the 32% growth from the Q1 of 2019. We saw solid improvement in our international markets and still expect full year growth in this category range between 5% 10%. Used margins were the highest since the Q1 of 2009 and sequentially the used category margin increased 170 basis points. International used margins improved over last year and moved closer to the U. S. Margin rate. International used sales increased as a percentage of overall used sales, offsetting the margin improvement and resulting in consolidated used margins that were flat to last year. Consolidated gross margins were comparable to the prior year quarter at 27.4%. While new software margins declined 150 basis points. During the quarter, we saw a mix shift in the software category from PlayStation 2 to newer platform sales. In addition, we offered more value to our customers during our annual game day sale resulting in a significant increase in our sales volume while recognizing there would be an impact on margin. The other category contributed a greater percentage to total sales the margin rate improved as we gained traction in the sales of digital online game cards. On the balance sheet, at the end of the quarter, we had over 4 $30,000,000 in cash. Total company inventory levels decreased 4.5% on a per store basis year over year. As you may recall, in January, we announced our $300,000,000 share repurchase program as part of our 2010 capital allocation plan. We have not purchased any shares under the program since our last call in March, leaving us with $53,000,000 for future repurchases. We opened 47 stores in the United States and 27 internationally. Overall, the global store base had a net increase of 36 stores. Our effective tax rate for the Q1 was 34.8% compared to 38% in the Q1 of last year with the decline coming from international tax strategies. Quarterly guidance. As we analyzed our earnings estimates for the next few quarters, we determined that current consensus estimates for the 2nd and third quarters were not appropriately weighted based on historical earnings results or by the expected growth over the next 6 months. Therefore, in order to provide shareholders with a more accurate business outlook, GameStop is going to provide this one time earnings guidance for the next two quarters. For the Q2 of fiscal 2010, we expect comparable store sales to range from negative 2% to plus 2%. Diluted earnings per share are expected to range from $0.25 to $0.27 a 9% to 17% increase compared to $0.23 in the prior year quarter. Based on our industry analysis and expected strength of several upcoming new video game software releases, the company is projecting 3rd quarter fiscal 20 10 diluted earnings per share to range from $0.38 to $0.41 a 19% to 28% increase over the prior year quarter. We are reiterating our full year 2010 guidance that we first announced on our call in March. Company revenues are still projected to grow between 4% 6% with comparable store sales ranging from flat to 2%. Earnings per share for the full year are still projected to range from $2.58 to $2.68 representing an EPS growth rate of 14% to 18% based on 2,009 EPS of $2.27 excluding debt retirement costs. Our current expectation for foreign currency exchange rates is that any impact felt by the change in the euro relative to our initial plan will be offset by the movement in the Canadian and Australian dollars. Now, I will turn it over to Paul for his comments. Thanks, Rob. I would now like to add some color to our progress in the Q1 and provide an update on our strategic initiatives. As Dan mentioned, we continued to gain share on titles released in the quarter, thanks to our unique title launch model. Advanced marketing of exclusive content helped us exceed our pre order goals during the quarter, midnight events created excitement in stores at launch and trade credits provided the best value proposition for purchasing a new video game. We continue to innovate the title launch process this quarter leveraging social media to multiply our impressions and media value, as well as using our online team to drive traffic both online and in stores. Our title lineup was strong in the Q1 and GameStop's share of these titles was dominant. Nintendo's Pokemon SoulSilver, HeartGold was a great success as consumers loved GameStop's exclusive downloadable characters, contributing to our highest week 1 share in history with a Nintendo product. EA's Battlefield Bad Company 2, Sony's God of War 3, Square Enix's Final Fantasy 13 and Take 2's Bioshock 2 rounded out our top titles. On the hardware front, we had a successful launch of the Nintendo DSi XL and led market share at launch on this handheld. Supply on hardware was a continuing challenge this quarter, as on an average daily basis, our U. S. Stores were out of stock on PS3 for 80% of the time and our out of stocks on Wii was 50% of the time. In spite of that shortage, GameStop gained market share on all three consoles. Our stores team launched a customer service recognition program and allow for enhanced service, continuing to improve our industry leading service levels in store. Our new store performance during the quarter continued to be solid with the portfolio ahead of pro form a. Our real estate renewal process continues to yield rent savings during 20 Targeted customers received free in game play cards with purchases at GameStop and they used the codes on cards to enter the game site online. The results were that we added a large number of new game players to Legends of Zork, roughly doubling the audience of that game in 4 weeks. Our customer acquisition costs were significantly lower than advertising driven customer acquisition and it is clear to us now that stores can efficiently convert online game players and provide a multi channel gaming experience. A second strategic initiative we shared with you previously is our in store downloadable content pilot that will launch in 35 stores in partnership with Microsoft at the end of May. These stores will merchandise a limited amount of DLC and promote that digital content to consumers. Consumers will pay for the content with any form of tender, including trade credits. This process will eliminate a lot of the friction of searching and discovering content online and will bring the power of buy sell trade to the digital sale. The test will expand the SKU count each month through the summer, going live to our entire U. S. Store base in the fall. We are pleased to participate in the launch of Electronic Arts Online Pass and sales of DLC on new titles. We support the creation of added downloadable content for popular franchises as we see that as extending the life of titles and broadening the base of game players. We do not anticipate an impact to our used margins due to this program. The amount of used game buyers currently playing online is low and as it grows, our proprietary models will manage trade and sale pricing to reach margin goals. Lastly, we believe that the online pass process will allow publishers to better leverage their IP content through DLC sales to both used players and new game buyers. A great example of this trend is this quarter's launch of Modern Warfare 2 stimulus package from Activision that gave us an opportunity to promote DLC in store on a popular franchise and we are pleased with the results. We have leading market share on download cards and saw a a significant increase in our run rate of point cards during this launch, reaffirming that consumers see GameStop as the destination for purchasing their digital add on content. Market data tells us that GameStop consumers are ahead of the mass market in digital adoption and we see the percent of customers buying both physical games and digital playing cards growing rapidly in the Q1. Our investments in proprietary point of sale technology have put us in a position to partner with publishers as they grow their digital offerings. Merchandising and promoting this content as part of the in store and online sales process extends the reach of the GameStop brand as a multichannel game destination. We are having conversations with multiple publishers on leveraging the potential of digital sales at GameStop stores. A third strategic initiative we have discussed with you previously is our new loyalty program. In development for over a year, the program will launch in 4 U. S. Markets and 2 0 4 stores on Friday, May 28. This program will provide members special access to game related rewards and merchandise based on increased purchases and we have created proprietary technology at POS and online to differentiate and reward our loyal customers. The loyalty program will roll out to the rest of our United States stores in the fall of this year and will become a major component of our new title marketing efforts. In closing, I would like to thank all of our GameStop associates in 17 countries for their passionate commitment to the video game consumer during the Q1 and now open it up for questions. We'll take our first question from Colin Sebastian with Lazard Capital Markets. Great. Thanks and good morning. Congratulations on the quarter. Thank you. First, you alluded in your comments to the industry data, which from February to April showed a reasonable decline in new software sales and your sales were up 13% over the same period. I wonder if you could if you attribute all of that gap to market share gains? Or is it possible that the data itself might be underestimating industry trends? And I have a couple of follow ups. Thanks. Tony, do you want to take that question? Based on everything that we're seeing from a launch perspective and the mix of titles that were launched in the quarter, we believe that the information is accurate. So, we have no reason to believe that it's inaccurate. Okay. And then, I guess, related to that perhaps, in terms of linearity of sales of some of the recent releases, I think we've heard a lot about sales falling off pretty quickly a week or 2 after launch for a number of games. Is that what you're seeing in your stores as well? Or if and if so, is that trend changing at all? We actually see as games continue to get broader, especially with online play, we actually see the games do tend to have a longer tail. And so we are not seeing games fall off precipitously after the 1st 2 weeks of launch. And we clearly had some very strong catalog titles last year that we did not have this year and I think that contributed more to the decline as opposed to the quick fall off of games over launch recently. Okay, great. Thanks very much. We'll take our next question from David Magee with SunTrust Robinson Humphrey. Are you seeing much movement in titles in the second half of the year, things that you were expecting in the second half, maybe moving to next year? Do you see much risk of that at this point? We don't see a lot of risk of that, David. We really see that most of the titles so far that are scheduled and have been talked about for the second half are staying in the second half. David, this is Paul. The second half, we're going to learn a lot at E3. As you know, a lot of the Natal discussion and move discussion is being really held up until E3. So I think, fair to say, we'll know a lot more after that. So we haven't seen a lot of those titles announced obviously, but of the announced titles, we don't see a lot of slippage into the next year. And as we've said in the past too, our Q4 plan did not include titles for Natal and move. So hopefully, we're going to see some titles that make us pretty excited about that Q4. Do you have in your plans the impact of the hardware pieces themselves? The accessories themselves? We do not have that in our plan. And we'll take our next question from Ben Schachter at Rock Point Amtech. Hey guys, congratulations on the quarter. Thank you. A couple of things. You've been talking about the loyalty and the in store opportunity for DLC for a while, and I think a lot of people are very interested in seeing how this works. I was wondering if you could help quantify it. And I also just want to clarify that both loyalty and the in store DLCs are going to go live across all of U. S. This year in the fall? Paul, would you take that? Yes. Ben, let's take them 1 at a time. Obviously, we're excited about it. Let's start with DLC. We've been working on the technology for DLC for well over a year. And I think what's important to understand is that we've had to create proprietary point of sale technology in partnership with Microsoft to be able to show that DLC catalog at retail. We're also working on merchandising and marketing the DLC content in our stores. So this is something that we feel like the industry is moving our way and our investments are starting to really be timely and publishers see us as the destination for sale of DLC in store. We will be piloting in, I think we said the 35 stores in the spring. We'll be adding SKUs to the catalog. We're starting off with a limited catalog and then we'll be adding select titles and SKUs over the course of the summer we'll be live in all our U. S. Stores in the fall. The timing is based largely on our POS release and the technology rollouts that we have. As far as loyalty, 4 markets, which we've not announced, you're going to have to wait till Friday, May 28, because we don't want to create too much pressure on our stores with too many customers running in, but you will see that in those stores on Friday, 28, and that will be rolling nationally as well in the fall riding along with our fall POS release. As far as quantifying, we haven't disclosed anything on that. Rob or Tony, any comments you want to make on that? Other than we have internal goals, which we've not published yet in terms of number of consumers, we expect to sign up both this year and next year. And from those consumers, we would expect to get a much larger share of wallet. So yes, we do have some internal quantifications, but we've not made them public. As it relates to quantification of the DLC, I think it may be soon to quantify, but I think that what we understand as many in the industry do is that the discovery and the marketing of DLC is very underperformed at this point in time. And by us doing the marketing, showing it on our interactive kiosks, prompting it at our point of sale and making the transaction seamless at point of sale, we believe we're really going to drive this whole category, not only for GameStop, but for the industry. One of the numbers we're watching, Ben, is the percent of customers with a digital and a physical purchase that overlap and that number is really moving quickly for us. We also are going to watch closely the attach rate of DLC to new and used title launches and that's what's going to help us model the data, but too early yet to model that out publicly, I think. Great, appreciate it. One quick follow-up, Red Dead Redemption, you mentioned doing really well. I was wondering if you could put that in context versus some other titles and just what you might expect for that title going forward? Thanks. Red Dead Redemption has been one of the very positive surprises. It probably has outperformed as large as any title has so far year to date. So we're very excited for Red Dead Redemption and we see that it is not letting up. We continue to reorder and we expect that to have really strong legs and continue to be a very successful title. Great. Thanks. We'll take our next question from Bill Armstrong with C. L. King and Associates. Good morning. I was wondering if you could discuss in a little more detail your used sales, specifically U. S. Versus international. I think you said international used margins and sales were up. I was wondering if you could just flesh that out for us a little bit? Yes, Rob, would you take that please? The U. S. Sales were up single digits, the international sales were up double digits. We were very pleased with the results. I think Mike might have some further commentary on our efforts there to roll out best practices. Yes, our focus on implementing best practices across the regions continued to gain traction during the quarter. Our efforts centered on improving the buy sell trade refurb model through process improvement, the expansion of refurb capabilities and the implementation of proprietary technology. And as Rob said, our used margins increased over the prior year quarter and used sales increased double digits over the same period. Are used margins on the international side approaching that of the U. S. Yet? The gap has closed. Closed or narrowed? The gap has narrowed, it is not closed, but we are pleased with the direction. Great. Okay. Thank you. And we'll take our next question from Robert Higginbotham with Goldman Sachs. Thanks. Good morning. A similar question on the new front that is could you give us some color on how trends what trends look like across the different regions for new? And then I had a follow-up question. Does that relate, Robert, to new margin? New software, excuse me, new software sales. New software sales. International versus U. S. Again, we were very pleased with new software sales overall, both domestically and internationally, the increases were in the double digits. Got it. And as you look at how your used trends decelerated yet your new sales accelerated, how did the pattern of trade ins change as those moved in opposite directions? And kind of where how would you characterize your current inventory in the used business? Our current inventory in the used business is approximately flat to where it was last year. So we are in a good inventory position. So we have not really seen any changes dramatic changes in trend. There is one exception to that. We clearly had a very strong trade in program on the DSI last year. And so we obviously didn't have as many DSS coming back in this year, but in spite of that, our inventory remains in a very good position a use perspective. Yes, I also want to add to Rob's comment regarding new software sales that internationally we continue to gain market share in all markets where market share data is available on new software. Got it. Thank you. And we'll take our next question from Tony Whipple with Janney. Good morning. I was hoping you could comment on what the margin profile on the downloadable content will be? And also if you could highlight just some of the perks that have been finalized for the loyalty program that might be noteworthy? Tony, you want to take the first question? Sure. In terms of that, we are currently we have not disclosed those margins and we're currently continuing to work with all of our publishing partners and obviously the 1st party publishers to work on those margins. We have not disclosed that margin structure at this point. Then the second question related to PERKS for the loyalty program. The loyalty program will be very unique. There will obviously with it, it will be a program that's based on all activity, whether it's online or in our store, whether it has to do with trades or used sales or the purchase of new product or DLC or even some activities. So it will be a very broad ranging loyalty program. Will it be free or do you have to pay into it? At this point, it will be we will have both a free level as well as a paid level. And so we have an option for either. Very highly acclaimed perks and awards that gamers highly value that are very unique and only GameStop can offer. And we're working very closely with the publishers in order to really generate those perks. Yes, Tony, we might even let you in an hour early to a midnight launch if you buy enough. We'll be there. It makes it an 11 o'clock launch, right? And some of the awards that the publishers have brought forward are we know are going to be in great demand and will dramatically drive people to this program. Very excited about the work there. We don't like beta tests and stuff like that? Far beyond beta tests, I mean, that would be one, but I can't disclose everything at this point, but we have some that go far beyond beta tests. Think about placing yourself actually almost in the game, things like that, where we are going to give you experiences that no one else can offer. And we'll take our next question from Tony Gajkus with Piper Jaffray. Hey, good morning guys. It looks like new game sales peaked, packaged goods software sales peaked back in 2,008. Could you talk a little bit about when do the when does the used game business peak or is it just grow throughout the cycle? And any view on the market next year? I mean, do you anticipate growing the top line next year? Tony, let me take the first question. 2000 and 8, you're right, was the peak software year. But as we did the math once before and I think talked about it on this call, if you took out from both 2,009 and 2,008, the music category, which was clearly an aberrant, not long standing category, Actually, sales were flat year over year. And if you believe this year what the data looks like given our analysis, the industry will grow slightly this year. Now having said that, forecasting into 2011 is a little soon, but however, we believe that the Natal and the move as a category, a new category will generate a growth situation for 2011. So I think that, again, ex at the music category, 2,009 was not that bad, 2010 should grow and 2011, hopefully with Mitalin move, turns us into another growth year. And then I was just saying also advancements in 3 d seem to be pretty exciting. Right, advancements in 3 d. And then lastly, that's at the industry level. We believe we'll continue to gain share through new store openings, new initiatives, our loyalty program, the DLC program, etcetera, that we've outlined here. As a matter of fact, I would envision our market share of DLC to be possibly double what our market share is in Box Software. And given the fact that that's such a nascent industry at this point and the lack of discoverability exists, we believe that will be a major growth engine. Major growth for the industry. One comment, Tony, too, on the used business is just we've shared with you before on this call and in meetings that the awareness of the buy sell trade model, even among our consumers, is still relatively low in the 30% to 40% range. So that gives us really a lot of optimism around the headroom around buy sell trade and the ability to use that to drive used and new growth. So new or excuse me, the used software sales don't necessarily peak 1 or 2 or 3 years after new, it just you think it grows to the end of the cycle? I think that the used video game site will grow as long as new is growing, used will continue to grow and as long as we continue to grow the awareness of our used trade in program, which we are continuing to do more and more internationally as the international components are catching up to the U. S. Are moving in the right direction, And our loyalty program is also meant to help stimulate trade ins. So we have a of initiatives to continue to grow the used as a portion of our new. But used will grow like new over time because people are using the used games as currency to buy new games. Thanks guys. Good luck. And we'll take our next question from Arvind Bhatia with Stern AG. Thank you. A couple of questions. I wanted to first go to the loyalty program, which I think you've had a lot of success with in France with Micromania. Wondering if you're able to share some of the results from France, so we can start to at least think in terms of forming some real expectations there. Then second, it might be early, but the Walmart promotion that you guys alluded to, do you have some color on how aggressive you think this is going be? How long you anticipate? Or if you have any information you can share with us on how to kind of think about the impact of this? Tony, do you take the first part, please? Sure. Let me share with you a couple of results from the French What we have seen is that first of all, we have a very high utilization rate of the loyalty program. 87% of the customers in France actually participate in the loyalty program. So we have a very high participation rate. And whereas we are not modeling that internally simply because that is a best in class process. That is those are the results that we are getting in France. We have also seen significant market share increases among the people who are in the program in France versus people who are not in the program in France. And so we have modeled that into our internal documentation as well, but I not willing to disclose that information at this point. And the answer on the Walmart, I'm not sure about the sustainability. They announced it as a program to launch their new interactive site or website on that. So I'm not sure how long they plan on doing that, etcetera. As I said before, we think our unique advantages in our in store, our pre release marketing, ability to trade and get the immediate currency, etcetera, is something that has allowed us to continue to gain market share. One housekeeping, if I could. The tax rate this quarter, 35%, Rob, what should we be using for the rest of the year? And what was stock based comp? I'm sorry, the tax rate, the last part, stock based comp? I'll have to get back to you on the stock based comp number. On the tax rate, I think that you can model a number for the year. Give me just a second. That's comparable with fiscal 2,009. Great. Thank you. And we have time left for 2 more questions. The next one is from Edward Williams with BMO Capital Markets. Good morning. Just a couple of quick questions. Can you comment a little bit about the growth in web based downloadable PC game sales? And what sort of an effort you're taking at this point to kind of take that GameStop dotcom and turn it into not necessarily just a distribution channel, but a platform? And then a follow-up after that. Good question. Tony? Sure. I am unclear there are a lot of metrics on web based download and definitely there is growth in that area. And so we've watched that closely. There are a lot of different reports that Mark that articulate those growth rates. So, I can't give you a particular growth rate that we see in that category. As to our efforts though on the on game stop dot com, Definitely, in our road map, we see that we need to expand and will expand our downloadable PC title capability, and we expect that to grow. It's already growing at a very quick rate, and we expect that to grow exponentially as we develop that capability on gamestop.com and you should see that later this year. And it's a game platform, gamestop.com is a platform to play games? Definitely, gamestop.com is moving in towards more towards a digital platform, where people can be able to access all of the games that they want to play in the manner that they would like to play them, whether that be purchase them as packaged goods, whether that be download them in a PC based format, download DLC, play on based format, download DLC, play on a browser based technology or even look from a mobile standpoint, discover mobile applications. We believe that all of those are important gaming opportunities. We believe that people shop at GameStop, our customers want to game in that manner and what we want gamestop.com to become is a one stop shop for gamers. And so we anticipate that we will have all that capability. You'll see that in our roadmap that will occur within the next 18 months. Ed, one thing to add to that, this is Paul. I mean, if you think about the platform Tony is talking about, the other interesting thing is the stores as a customer acquisition engine. As we mentioned in our remarks about Zork, the stores as a customer acquisition engine for that platform are very efficient vehicle and it gives you a sense of what we think are the possibilities around leveraging that footprint. So it's a very interesting acquisition vehicle as well as a great potential platform. And just quickly to follow-up on the downloadable for a moment. How significant in your if you look at PC game sales for you, how significant is the downloadable PC sales through gamestop dotcom versus the packaged goods PC sales through the store channel? Is it measurable? Is it a third of it the size of it? Or is it just not significant at this point or any clarity along those lines would be helpful? It's a small part of our business, but a very fast growing part of our business. So it is measurable and it's growing at a very close rate. The other thing I had to add on the on gamestop.com, it will be fully integrated with loyalty as well. And that's a very important part as we roll out our loyalty program, gamestop.com will participate as well. Okay. And will that be fully integrated when the test begins on May 28? That will be fully integrated when we roll it out nationally. Okay, great. Thank you. And we'll take our next question from Mike Hickey with JanCo Partners. Thanks for taking my questions and great job on the quarter. It's nice to see a little green on the screen. Rob, can you quantify the foreign exchange impact for get to that data. Yes, I can. So for the quarter, the movement in FX rates added approximately $60,000,000 in sales and just under $1,000,000 in operating earnings. And then you were asking for non comparable store sales? Yes. That's not typically a number that we disclose. Okay. And then Paul, it looks like your SG and A cost per store has trended up the last 3 quarters. Is that something that we should a trend that we should model forward for the rest of the year? Rob, do you want to take that? I'm sorry, could you repeat that one? Yes, it looks like your SG and A cost per store has been up the last three quarters. I was just curious if that's a trend that we should model for the rest of the year? Well, I think that for the full year, what you can expect is that as we talked about in March, our SG and A will increase 30 basis points to 40 basis points from the rate last year over the full year for 20 10, again relating to our investments in our initiatives. Okay. And then last question, Dan, I was just curious what your thoughts were in terms of the growth opportunity for Natal and Move. Is it the accessories actually kind of penetrating the existing installed base? Or is it, in your view kind of driving the overall installed base, if you could just compare and contrast the 2? Well, I think I probably have to hold and wait till we come back from E3 and see the titles and see what who they're appealing to, etcetera. My guess would be they've talked about it expanding their audience for gaming. And so I think you will probably see titles targeted towards the existing base and I think we'll see titles that are clearly expansionary. So too soon to tell, but again, pretty excited about it and we think they could very well be drivers of new game software sales for the late half of late part of this year and into 2011. As well as system sellers. As well as system sellers, right. The gameplay, Mike, is as compelling as anybody on our team has seen. So and our team has really seen it all in video games. I'm very excited to have to agree in what they're going to show us. All right. Thanks guys. Good job. Okay. Thank you. So as you can see, our market share gains are driving our earnings growth. Our new initiatives such as our new loyalty program, ELC sales in store and other investments have been designed to keep this market share growing. Thank you for attending today's call.