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GameStop Holiday Sales Decline

8 Jan, 2013 By: Erik Gruenwedel

GameStop, the nation’s largest video game retailer, Jan. 8 said winter holiday sales through Dec. 29 dropped 4.6% to $2.88 billion compared with sales of $3.01 billion in the 2011 holiday sales period.

Total comparable store sales decreased 4.4%, with U.S. comps down 3.5% and international comps off 6.4%. Based on the holiday sales results, GameStop narrowed its comparable store sales range for the fourth quarter down 7.0% to 4.0% and the full year down 9.0% to 7.5%.

Grapevine, Texas-based GameStop said new hardware sales decreased 2.7% despite sales of 320,000 Nintendo Wii U units worldwide. Sales of new video game software decreased 5.1% as frontline title releases could not offset a decline in overall store traffic. Used game sales declined 15.6% as limited inventory due to fewer new titles released throughout 2012 and less promotional activity negatively impacted sales compared with last year.

Digital sales increased more than 40%, while sales in the mobile business were $76.5 million during the holiday period and have exceeded $160 million year-to-date. Additionally, global e-commerce sales improved 20.5% compared with the 2011 holiday period.

“Our successful Wii U launch, strong digital growth and continued momentum in the mobile space were countered by a decline in store traffic,” Paul Raines, chief executive officer, said in a statement. “As a result, GameStop expects its fourth quarter 2012 earnings per share results to be at the low end of its current guidance range. Our strong market share positions us well for the future, and we look forward to new product launches in 2013.”

Despite reporting sales below his expectation, analyst Michael Pachter with Wedbush Securities in Los Angeles said GameStop exhibits strong revenue and earnings growth potential from continued market share gains, digital growth and ongoing stock repurchase program.

“Share repurchases and a much stronger game lineup (Q1 releases expected to include BioShock Infinite, Crysis 3, Dead Space 3, Gears of War: Judgment, with Grand Theft Auto V in Q2) should drive earnings growth,” Pachter wrote in a Jan. 8 note. He added that new consoles are expected from Sony (late 2013) and Microsoft (early 2014).

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