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Economy, Price Cuts Dragged GameStop Holiday Sales
Economy, Price Cuts Dragged GameStop Holiday Sales
January 7, 2010 | By Leigh Alexander

January 7, 2010 | By Leigh Alexander
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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 GameStopís 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 Ubisoftís Assassinís Creed II, Nintendoís 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 yearís 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 Sonyís 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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Comments


Derek Smart
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So much for analyst speculations of a favorable period.

Thomas Lo
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Hmm, I wonder what Gamespot really has to say about what the most profitable systems are. Did they single out the PS3 as a source of growth or is the Wii or 360 in there somwhere? Given Nintendo's slow release schedule, I'm guessing the used game business is not that great for Nintendo games. Also, given how easily the 360 has been hacked and the amazing run of the PS3 at not being hacked (3 years and counting now), that probably helps their used sales of PS3 games.



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.

Matt Ponton
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Derek, I would take it as good news if in "one of the worst recessions since the Great Depression" we are actually barely breaking even with the previous year(s).

Timothy Ryan
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I wonder how much the last few year's numbers were inflated by expensive peripheral sales from Wii Fit and RockBand / Guitar Hero. At this point the market will be flooded as people don't need to buy the hardware anymore.

Derek Smart
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@ Matt



I never said it was bad news, just that it is a big drop from what the analysts were recently saying.


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