GameStop Corporation
(
GME
) bore the brunt of weak traffic and lack of significant game title
launches, which was well evident in its dismal first quarter 2012
sales numbers.
The video game and entertainment software retailer came out with
its first quarter 2012 sales and earnings figures ahead of its
scheduled date. GameStop reported earnings of 54 cents a
share, a penny ahead of the Zacks Consensus Estimate, but 4% lower
than the comparable prior-year quarter. Reported earnings were also
near the higher end of the company's guidance range of 52 cents to
55 cents.
The results were impacted by significantly weaker revenues, as
evident from the 12.5% decline in its same-store sales, in contrast
to the company's expectation of a decline of 9.5% to 7.5%.
The NPD Group, a market research firm, confirmed the continuing
slump in the video game industry as it stated that U.S. sales for
April 2012 were down 32% from the comparable period of the previous
year.
Amid this gloom, the company stood by its earlier guidance and
expects earnings of $3.10 to $3.30 per share in fiscal 2012,
reflecting an increase of 8% to 15% over the last fiscal. GameStop
is slated to report its first-quarter 2012 results on May 17.
Despite secular headwinds, we believe that the company is well
positioned to drive sales in the long run. The company holds a
significant position in the used video game products market, which
has been resilient in this downturn.
Moreover, the company's venture in digital, iDevice and gaming
tablet businesses would be accretive to its results. GameStop's
buy-sell-trade model of selling new games and buying back used
games and PowerUp Rewards program make it a popular destination for
shopping.
Currently, we have a long-term Neutral rating on GameStop.
Moreover, GameStop, which faces stiff competition from
Amazon.com Inc.
(
AMZN
), holds a Zacks #3 Rank, which translates into a short-term
Neutral recommendation.
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