) dipped 6.3% to close at $23.19 on Tuesday, following the video
game retailer's dismal holiday sales performance on account of
weak store traffic count. This offset solid digital growth and
muted the launch of Nintendo's Wii U, compelling the Grapevine,
Texas based company to trim its forecasts and thus, hinting at
troubled waters for the video game business.
GameStop's holiday sales for the nine-week period ended
December 29, 2012 dropped 4.6% to $2.88 billion. Comparable-store
sales fell 4.4%, reflecting a decline of 3.5% and 6.4% at its
U.S. and international comps, respectively.
By sales mix, new video game hardware sales edged down 2.7%,
despite having sold 320,000 Nintendo Wii U units globally,
whereas new video game software sales dropped 5.1%. The pre-owned
category sales plunged 15.6% due to lower number of new titles
released in 2012 and less promotional strategies undertaken.
The disappointing holiday sales results persuaded management
to become more cautious on their outlook, which now envisions
comparable-store sales to decrease between 4% and 7% during the
fourth quarter and in the range of 7.5% to 9% in fiscal 2012.
Earlier, GameStop had projected comparable-store sales in the
range of 1% up to 7% down for the fourth quarter, and to decline
between 6% and 9% in the fiscal year.
GameStop also restricts its fourth-quarter fiscal 2012
earnings outlook at the lower-end of the previously provided
guidance range of $2.07 to $2.27 per share. The current Zacks
Consensus Estimate for the quarter is $2.16. Consequently, we
could witness a correction in the Zacks Consensus Estimates in
the coming days as well in the rank of the stock, which currently
stands at Zacks Rank #2 (Buy).
On the brighter side, Digital receipts surged over 40% year
over year, whereas Mobile sales, consisting of tablet and
pre-owned iDevice products, came in at $76.5 million during the
holiday season. GameStop, at its last earnings call had guided
mobile sales in the range of $150 to $200 million for fiscal
2012, and has so far achieved more than $160 million. The company
also informed that worldwide e-Commerce sales soared 20.5% during
the holiday season versus the prior-year period.
GameStop, which competes with
), also continued with its shareholder friendly moves during the
holiday period, and bought back 458,000 shares at a price of
$25.51 per share, aggregating $11.7 million. The company still
has about $488.3 million at its disposal under its share buyback
The slump in the video gaming industry persists due to
increased online gaming activities, and shifting preferences
toward tablets and mobile phones from traditional game consoles.
Consumers increasing accessibility to video games and PC
entertainment software over the Internet could hit the sales of
packaged goods and used games, and impede future growth.
Consequently, GameStop continues to branch out and has reinvented
itself as a mixed retailer of physical and digital gaming and
electronics products. The company's venture in digital, iDevice
and gaming tablet businesses would be accretive.
Currently, we have a long-term Neutral recommendation on the
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GAMESTOP CORP (GME): Free Stock Analysis
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