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GameStop Revenue Up, Profits Down As Firm Cuts Outlook

GameStop Revenue Up, Profits Down As Firm Cuts Outlook

November 20, 2008 | By Staff

November 20, 2008 | By Staff
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More: Console/PC

Leading worldwide specialty retailer GameStop has announced sales up 5.2% to $1.695 billion in the quarter ending November 1st. But as profits edged down despite good November sales indications, it cut forecasts for the rest of the financial year on economic uncertainty.

Comparable store sales were down 1.8 percent during the third quarter, due primarily to the difficult comparison to last year's launch of Halo 3 -- the largest in GameStop’s history, which drove comparable store sales up 43 percent in 2007.

Overall, the company, which has 6,066 retail stores in 17 countries worldwide, saw $46.7 million in profits, a decrease over the $52.0 million seen in the same period in 2007 -- due in part to foreign currency fluctuations and merger-related expenses.

According to GameStop, recent trends are encouraging, as comparable store sales for October increased by nearly 11 percent, and increased 20.5 percent for the first two weeks of November, showing surprising strength given the unprecedented economic and financial crisis.

For the quarter, new video game software sales were up 10%, driven by the top five selling games during the quarter: Madden NFL 2009 from Electronic Arts, Star Wars: The Force Unleashed by LucasArts, Microsoft’s Fable 2, Nintendo’s Wii Fit, and Activision’s Guitar Hero World Tour.

Daniel DeMatteo, Chief Executive Officer, stated, "Despite the dramatic decline of the global economy and its severe impact on the entire retail industry, GameStop had a strong quarter. Sales have been very robust over the last several weeks, driven by strong new title releases such as Activision’s Call of Duty: World at War and World of Warcraft: Wrath of the Lich King, and Microsoft’s Gears of War 2."

Looking forward, the company says that it "continues to expect a solid fourth quarter in sales and earnings, albeit tempered slightly by the weakness in consumer spending", based on a strong game line-up for this holiday season and game hardware price cuts.

For the quarter ending February 2009, GameStop is now forecasting store sales increasing from 4 to 5 percent over the year previous -- a reasonable increase.

However, its new prediction of earnings per share of $1.29 to $1.34 is down from previous forecasts of $1.37 to $1.40, failing to meet analyst expectations -- although on the company's call to investors, analysts congratulated the company on its "strong execution" in the face of challenging times. Still, GameStop's shares dipped in early trading, and are now down $1.28 to $19.28.

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