GameStop slashes same-store sales forecast; shares skid

Tue Jan 8, 2013 12:40pm EST
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By Malathi Nayak

(Reuters) - GameStop Corp, the largest U.S. video game retailer, slashed its forecast for fourth-quarter sales after customer traffic shrank over the crucial holiday season, sending its shares down 6 percent.

GameStop said it now sees same-store sales falling between 4 percent and 7 percent for the fiscal fourth quarter ending January 28, versus a previous forecast ranging from an increase of 1 percent to a decline of 7 percent. The company also warned that quarterly profit will come in at the low end of its previously forecast range.

The video game industry has been struggling to reverse a downward spiral in software and hardware sales that stretched through the holidays.

"Like many retailers, we were disappointed in traffic at holiday," Chief Executive Paul Raines told Reuters in a telephone interview. "Fortunately for us, a lot of the new businesses picked up a lot of the gap."

A 16-percent plummet in used-game sales -- an increasingly large part of the company's physical business -- was "a yellow flag" while new software and hardware sales were in line with expectations, analyst Colin Sebastian of R.W. Baird said.

"The issue with pre-owned is that it disproportionately affects their margins, so they lowered the earnings guidance as well," Sebastian said.

New hardware sales -- mostly of game consoles -- slid almost 3 percent. One bright spot was that GameStop's Nintendo Wii U sales did reasonably well, and mobile and digital sales came in better than expected, analyst Arvind Bhatia of Sterne Agee said.

GameStop said it sold 320,000 of the new Wii U game console, which hit store shelves in November, during the holiday period.   Continued...