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The rally in the videogame retailer is making Geo Holdings Corp . (T:2681), a Japanese bricks-and-mortar retailer of games and DVDs, look positively cheap in comparison. The Japanese firm trades at about 0.2 times its trailing sales, versus GameStop’s nearly 2 times valuation as of Wednesday.
What it’s lacking in activist investor board members — and an army of Reddit-fueled backers — Geo makes up for in regular dividend payments, plus it has only posted a net loss in two quarters in the past 10 quarters, compared with 8 for GameStop, Bloomberg-compiled data show. Geo has generated a profit of $22 million in the last 12 months versus a loss of $275 million for its U.S. peer.
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And while no one is thinking that Gamestop’s gains have anything to do with its fundamentals, consider that Geo trades at just 1/20 of the market value of GameStop (as of the U.S. firm’s most recent close, at least), and operates in a country that still loves physical media.
The company runs over 1,000 of its Geo locations in Japan. Like GameStop, it takes trade-ins for second-hand games, while it also rents movies and CDs (Japan does not permit videogame rentals by law). Another plus point is Geo’s “2nd Street” chain of stores, which sell used clothes, shoes and electronics.
Geo estimates that the secondhand market in Japan will nearly double in size in 2025 to 3.5 trillion yen ($33.8 billion) from 2015, with online flea market Mercari Inc. another beneficiary of this trend. As movie rental sales decline, Geo has seen the segment make up an increasing share of its business.
©2021 Bloomberg L.P.
