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Texas Business Report: Will GameStop Get Its Christmas Wish of Better-Than-Expected Sales?

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The Game is Up … and Down

Despite a strong performance this summer, GameStop is bracing itself for below-average sales this holiday season. The Grapevine-based video game retailer reported its third-quarter results on Thursday, announcing that profits powered up by 45 percent over the same period last year. One might expect that success to continue, given this month’s releases of the Microsoft Xbox One and Sony PlayStation 4 consoles. However, as the Dallas Morning News reports, “GameStop said it expects to report a Christmas quarter profit in the range of $1.97 to $2.14 a share,” which falls short of analysts’ projected target of $2.15 per share. The conservative forecast prompted a 7-percent drop in the company’s stock price the next day. 

The Bottom Line: While GameStop may turn a slightly lower profit than expected in Q4, this week’s earnings report had plenty of positive news. According to the Morning News, hot-selling games including Grand Theft Auto V “helped lift same-store sales 20.5 percent, the highest level for a quarter since May 2008.”

Please Lettuce Apologize

Houston-based food distributor FreshPoint Inc. agreed this week to pay $4.2 million to settle a lawsuit filed by the U.S. Department of Defense, the Produce News reports. The government accused FreshPoint (a subsidiary of Sysco Corp) of fraudulently overcharging for fresh fruits and vegetables it sold to the DOD over the course of two years.

The distributor’s contract with the agency required it to sell all produce “at cost, plus a pre-established mark-up for profit.” But FreshPoint allegedly set higher prices based on “its view of the prevailing market price of the goods at the time of sale,” according to a whistleblower who previously worked at the company.

The Bottom Line: Under the terms of the settlement, the whistleblower will receive nearly $800,000 in return for coming forward. FreshPoint and Sysco continue to “expressly deny the allegations,” according to The Produce News.

All Health Breaks Loose

Irving-based Kimberly-Clark, which owns hundreds of consumer product lines including Huggies and Kleenex, is preparing to spin off its healthcare products division to concentrate its efforts on “consumer and professional brands,” Businessweek reports. The unit to be spun off, which manufactures items such as surgical masks, sterile wraps and catheters, “accounted for 7.7 percent of the company’s $21.1 billion in sales” in 2012, but it had been in financial decline for more than a year before revenue picked back up last quarter. The arrangement still needs to be approved by Kimberly-Clark’s board of directors and may take up to a year to complete.

The Bottom Line: Businessweek points out that Kimberly-Clark’s decision to jettison the health products unit is a departure from the strategies of competitors including Clorox and Newell Rubbermaid, which are “seeking to deepen their operations in the market.”

Winners of the Week: Fracking-Friendly Legislators

The energy industry has been generous to Texas’ representatives in Washington, donating hundreds of thousands of dollars to their campaign funds over the last decade. The Dallas Morning News reported this week that between 2004 and 2012, “companies involved in hydraulic fracturing and their trade groups” gave $509,000 in contributions to Representative Joe Barton, R-Arlington. Also, Senator John Cornyn received $312,000 from those groups, and Senator Ted Cruz took in $295,000, all of which went into his 2012 war chest. Perhaps not coincidentally, all three officials have been strong supporters of easing federal regulations on fracking. 

Losers of the Week: Hackers

A hacker that launched cyber-attacks on Austin-based Stratfor Inc. and several other organizations in 2011 and 2012 has been sentenced to ten years in federal prison, Businessweek reports. Twenty-eight-year-old Jeremy Hammond pleaded guilty to the conspiracy charge for hijacking the accounts of more than 850,000 Stratfor employees and customers, costing the company between $1 million and $2.5 million and forcing it to shut down for several weeks.

Hammond, who claims to be a member of the hacking group Anonymous, says his crimes were “acts of civil disobedience” intended “to expose and confront injustice and to bring the truth to light.” 

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