Electronics Boutique: Playing the PlayStation Boom

By all accounts, the PlayStation 2 looks like it will be the mega seller for
the Christmas season.

In early August, I wrote a

about Activision being a beneficiary of the PlayStation 2 boom –
“Activision: Back from the Brink – Again”. The stock was at
10-3/16; the stock is now trading at 13 3/16.

But this cycle is still early and there will be other beneficiaries. Take
Electronics Boutique ,
which is a specialty retailer. The company started in 1977 from a
10 by 13 foot kiosk selling radios, calculators and watches.

Now, the company retails video games, hardware, productivity software and
accessories from 639 stores in 46 states, as well as in Canada, Australia,
New Zealand and South Korea.

In the past quarter, the company had revenues of $125.8 million, which was
up 11.2% from the same period a year ago. There was also a net loss of $2
million. The company’s e-commerce site, EBworld.com, had a loss of $1
million. Although, online sales were $4.1 million and the site attracted
about 9 million unique visitors.

The revenue slowdown was mainly attributable to the fact that consumers are
awaiting the release of the PlayStation 2. Also, the company has finished
its state-of-the art inventory system, which should provide a better way to
allocate supplies across the store system.

But the slowdown should stop soon, as the PlayStation 2 is released in late
October. Estimates are that about $1 billion in PlayStation 2 related sales
will bulge in the last three months of 2000.

In light of this, the stock price of Electronics Boutique has already been
jumping. But keep in mind that the stock has already been depressed for
some time. It would not be surprising to see the stock continue its surge
through the holidays.

Another advantage will be spin-off sales. For example, once someone
purchases a Sony PlayStation 2, this person is also likely to purchase games
and accessories. It is a virtuous cycle, which should mean lots of
excitement for investors.

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