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GameStop Q3 Does a '360'

29 Nov, 2005 By: Erik Gruenwedel

GameStop Corp., the No. 1 video game retailer, posted a net loss of $2.5 million for the third quarter (ended Oct. 29), compared to profit of $12 million during the same period last year.

The Grapevine, Texas-based retailer cited a weak release slate and consumers taking a breather before the release of Microsoft's new Xbox 360 game console as primary factors driving down same-store sales 12 percent.

GameStop last year posted 750,000 unit sales of Halo 2 (Microsoft), in addition to strong sales of Grand Theft Auto: San Andreas (Take 2) and Fable (Microsoft), among others.

“The release of Xbox 360 had a negative impact on new title sales as core gamers needed to conserve their cash for this big ticket purchase,” David Carlson, GameStop CFO, said in a call with investors.

Overall sales, which included three weeks of revenue from recent acquisition Electronic Boutique, rose more than 28 percent to $534.2 million, compared to $416.7 million last year.

Richard Fontaine, chairman and CEO of GameStop, attributed some of the revenue gain to a 5 percent increase in used game sales, which accounted for 31.9 percent of revenue. He said the company's used inventory is at “an all-time high.”

“We are well positioned to drive the budget category consumer,” Fontaine said. “We will promote used games more aggressively in the fourth quarter.”

The CEO reiterated cautious optimism for the Xbox 360 despite selling out every copy “in record time.”

Fontaine said he expected sales of 360 to fall short of company projections due to worldwide shortages of the device. He said the company has enough of the units in the pipeline to satiate demand through December, but not January.

“I'm holding my breath going forward,” Fontaine said. “It is in Microsoft's best interest that they take care of their focused users.”

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