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WEST CHESTER, PA-Fresh from its groundbreaking launch of Microsoft’s Halo2 in “Midnight Madness” events at more than 1,300 EB Games’ storefronts nationwide, Electronics Boutique Holdings Corp. maps a strip center expansion plan to “target the value-conscious customer,” according to Jeffrey Griffiths, president and CEO. He cites that customer as among “the many markets that are underserved by the game industry. When we were strictly mall-based, we weren’t reaching out to that customer.”

Already the price leader in electronic games, EB enters the fourth quarter with consoles priced at $149 a unit versus $179 last year. “Pre-play is our key business differentiator,” Griffiths says. “We drive sales of new releases by making them more affordable. A customer can bring in used product and buy a new release for less than $50,” he explains.

In addition to increasing market share by luring more value-conscious customers, EB also plans to broaden its appeal to an older demographic. White its previous market was skewed to kids roughly between the ages of five to 12 or 13 years old, Griffiths believes new handheld portable products are designed for an older group.

EB’s third-quarter comp store sales rose 14%, compared with a 6.5% decline in the third quarter of 2003. Revenues in the most recent quarter were up 37.5%, exceeding expectations in the sales of both hardware and software along with the sale of used equipment. “In the software category, many titles in the strong new release line-up exceeded our original performance expectations,” Girffiths says. “In addition, the early release of Sony’s new Playstation 2 model contributed to better than anticipated hardware sales.” A counts of more than 80,000 people lined up for the Halo2 Midnight Madness event at one EB Games’ store, which bodes well for fourth quarter, according to Griffiths.

EB’s stores average just over 1,000 sf, Liz O’Sullivan, director of marketing, tells GSR. It the US, there are currently 659 units in malls and 748 units in strip centers. The company also operates approximately 500 units in Canada, Australia, New Zealand, Denmark, Germany, Italy, Norway, Sweden and Puerto Rico. It plans to continue to grow its store base in the US and internationally at a rate of approximately 28% a year, according to James Smith, CFO. By year-end 2004, it will have added 460 new units this year and plans call for the addition of at least as many in 2005. He anticipates that international sales will account for between 28% and 30% of total 2005 revenue. The company also sells through its website.

This October, EB added a new 315,000-sf distribution facility in Sadsbury Twp., near its headquarters here. The building was fully operational for the holiday season, “to ensure that our customers will remain among the first to receive new releases,” Griffiths says. It also operates a distribution center in Louisville, KY.

Laura Woods, senior manager of Dublin, Ireland-based Research and Markets, predicts that the worldwide market for video games and interactive entertainment is expected to grow from $23.2 billion in 2003 to $33.4 billion in 2008. EB is the market-share leader in Canada and Australia and its strategy calls for also achieving that title throughout the US and Western Europe.

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