GameStop is doubling the space in its stores dedicated to collectibles this year in forecasting 30-40% annual sales growth for the category through 2019, when the company projects that collectible sales will hit $1 billion.

The move will increase collectible sections to 15% of display space in most GameStop stores, COO Tony Bartel told analysts as the company released earnings this week. But in 50 of GameStop’s largest U.S. stores and 100 in international markets, half of the merchandise mix will be collectibles, Bartel said.

The company projects collectible sales, which it generates under the ThinkGeek banner, will increase to $650-$700 million this year from $494 million in 2016. GameStop’s collectibles sales rose 27% to $212.4 million in Q4 ended Jan. 28.

The expansion of the collectibles, coming less than two years since it acquired ThinkGeek, includes a ramp-up of DTR agreements. “We are entering into licensing agreements with major IP holders to produce unique product to support our $650 million to $700 million sales plan,” Bartel said.

In addition to the dedicated sections, GameStop will open 20 standalone ThinkGeek stores in the U.S. this year and 15 in international markets, where it operates under the Zing Pop Culture banner.

The emphasis on collectibles and its Tech Brands business – GameStop operates AT&T wireless stores as well as Spring Mobile and Simply Mac locations – comes as it struggles with the videogames console and software business. Collectibles, Tech Brands and digital sales are projected to account for 40% of the chain’s operating earnings this year, up from 36.7% in 2016 and increasing to 50% by 2019, company executives said.

GameStop’s sales of physical games in Q4 ended Jan. 29 fell 15% — substantially more than the 5% forecast last September – to $924 million. Sales of the top eight videogames titles, excluding Pokemon, dropped 40% during the October to December period, NPD said. On the hardware side, sales declined 29% to $583 million, driven by a 15% decline in average hardware prices.

GameStop posted strong sales of Nintendo Switch console, having sold through initial inventory within two days of launch on March 3, Bartel said. “Multiple replenishments” since have sold out in “hours.” Bartel said. GameStop has sold 5.5 titles and accessories with each Switch console.

Overall, GameStop, taking a $56 million in charges against Q4 earnings partly for store closings, reported a 15.6% drop in Q4 net income to $208.7 million. About $46 million of the charge was tied to closing Tech Brands stores. Sales declined 13.6% to $3 billion on a 16.3% decrease in same-store sales. It projects a 2-3% decline in revenue this year as it closes 150 of its 3,920 U.S. locations after having shut 119 in 2016. Same-store sales will be flat to down 5%, company officials said. The decline in revenue will be coupled with a 3-10% decrease in earnings.

Contact:

GameStop, Tony Bartel, Chief Operating Officer, 817-424-2000, tony.bartel@gamestop.com