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Economy, Price Cuts Dragged GameStop Holiday Sales
by Leigh Alexander [PC, Console/PC]
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January 7, 2010
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GameStop's holiday sales were flat in 2009, and same store sales fell 8.6 percent. The leading video game specialty retailer revealed results for the nine-week season ended January 2, 2010, in what's likely the first clue to how the industry's 2009 ultimately closed out.
Total sales came to $2.86 billion -- a number the retailer stresses is "still the second-highest earnings year in GameStop’s history, coming off a record fiscal year 2008."
Sales of new games rose 4 percent during the holiday period, led by Activision's Call of Duty 4: Modern Warfare. Other key sellers in GameStop's holiday top five were Ubisoft’s Assassin’s Creed II, Nintendo’s New Super Mario Bros. Wii, and Valve's Left 4 Dead 2 and BioWare's Dragon Age: Origins, both via Electronic Arts.
And although GameStop says its sales of used software grew 10 percent and "outperformed the sales trends in general," this key component of the retailer's business was also affected, coming in less than forecast thanks primarily to economic conditions.
Hardware sales were down 8 percent year over year, however, thanks to console price cuts that took place alongside actual unit sales declines.
Says GameStop CEO Dan DeMatteo: "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."
"Although we are still in the planning stages for our fiscal year 2010, we expect that strong PlayStation 3 demand, an exciting title line-up, combined with anticipated economic recovery, will all be factors that should drive software growth and therefore GameStop earnings in 2010," says the company.
Based on its holiday performance, the company lowered its fourth quarter and full year guidance; for the fourth quarter it now expects $1.25 per share, down from $1.29, and for the full year it expects $2.23 per share, down from $2.27. It lowered its expectations for comparable store sales a full percent for both fourth quarter and full year, but says its total sales grew 2 to 3 percent during 2009.
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But then again, gamespot doesn't want to alienate any of the major manufacturers. With the advent of downloading games, gamestop's days may be numbered anyways. Steam had a huge sell on PC games during the break with games being over half off in many instances. Most of that is all developer profit with only a small slice going to steam. Why get GTAV for 55 bucks used at gamestop 6 months after release when you can get it for 25 bucks to download instead? Downloads may have a very focused effect on hurting gamestop's most profitable business.
nobody knows how much games are sold over Steam, I still doubt that the number is as high as many think, otherwise Steam would publish numbers. Your argument for GTA IV is flawed, why download the game for 25 bucks after 6 month, when at that moment you can easily pick up a used retail copy for the same price?
The most profitable system? Nobody knows and nobody ever will know, just because releasing this numbers would mean to say openly, what Gamestop is paying for each console and each game. No Retailer in the world would publish such numbers, this has nothing to do with alienating one of the big three, it has more to do with doing business in a competetive market.
@Matt Ponton
I don't see where you read the the industry is "barely breaking even" with the previous year. Only the holiday sales were flat, but all over the year, sales were down, so expect a full year on year decline up to 10%.
I never said it was bad news, just that it is a big drop from what the analysts were recently saying.