Video game and entertainment software retailer GameStop Corp. (GME) reported Thursday a 8.6% decline in comparable store sales for the November-December nine-week holiday period. Total sales for the period were flat with last year, even as new stores continue to perform very well. The company also slashed its earnings forecast for the fourth quarter and the full year 2009.
The Grapevine, Texas-based company reported total sales of $2.86 billion for the nine-week holiday period ending January 2, 2010, flat with the year-ago period. Meanwhile, comparable store sales for the period decreased 8.6%.
The company noted that new video game software sales increased 4% to $1.29 billion during the holiday period, while new video game hardware sales declined 8% to $623.6 million, due to decline in unit sales as well as the recent price cuts on gaming consoles.
Meanwhile, used video game product sales grew 10% to $596.5 million, which was less than forecast and was not impacted by other entrants in the category. However, the sales in the category were slightly impacted by adverse weather and economic conditions. Other sales declined to $349.2 million from $386.3 million in the prior-year period.
During the period, new video game software accounted for 44.2% of the company's total sales, new video game hardware accounted for 21.8%, used video game products accounted for 20.8%, and other sales accounted for 12.2% of total sales.
Fortune 500 and S&P 500 company GameStop, which operates 6,457 retail stores worldwide in 17 countries, is the world's largest video game retailer and sells its products through its GameStop, EB Games and Electronics Boutique trade name stores, and websites, including GameStop.com and EBgames.com, as well as 'Game Informer' video game magazine. The company is also seen pricing most of its video games at a consistent price of $59.99 per title.
The company revealed that Call of Duty: Modern Warfare 2 from Activision, Ubisoft's Assassin's Creed II, Nintendo's New Super Mario Bros. Wii, Left 4 Dead 2 and Dragon Age: Origins from Electronic Arts, were the top five video games sold during the holiday period.
In a statement, chief executive officer, Daniel DeMatteo said, "Despite a kick start to this year's holiday selling season with several major title launches, sales momentum was impacted in December by economic weakness in all global operating segments, winter storms at peak shopping periods in December, and unexpected shortages of key products such as New Super Mario Bros. Wii, Nintendo Wii and Sony's PlayStation 3 consoles."
Looking ahead, GameStop slashed its earnings forecast for the fourth quarter to a range of $1.25 to $1.29 per share from its prior guidance of $1.47 to $1.65 per share. On average, eighteen analysts polled by Thomson Reuters currently expect the company to report earnings of $1.57 per share for the fourth-quarter. Analysts' estimates typically exclude special items.
The company also currently projects comparable store sales for the fourth quarter to decline in a range of 8.5% to 9.5%. Earlier, the company expected a decline of 1.0% 0- 7.0%.
For fiscal 2009, the company now expect earnings in the range of $2.23 to $2.27 per share, sharply lower than the previous outlook of $2.45 to $2.63 per share. The Street is looking for earnings of $2.55 per share for the full year 2009.
The company noted that the above forecasts do not include debt retirement costs or merger-related expenses.
GameStop expects software growth to be driven by strong demand for PlayStation 3 gaming console, boosted by an exciting game title line-up and anticipated economic recovery, This would also boost its earnings in 2010.
In its recent third quarter, GameStop in November reported an increase in net income to $52.23 million or $0.31 per share from $46.67 million or $0.28 per share in the year-ago quarter, aided by sales growth of new video game software and used video game products. Total quarterly sales increased 8.2% to $1.83 billion from $1.70 billion in the same quarter last year.
In Thursday's regular trading session, GME is currently trading at $20.59, down $3.44 or 14.32% on a volume of 23.27 million shares. In the past 52-week period, the stock has been trading in a range of $19.42 to $32.82.
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