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GameStop sees weaker-than-expected new software sales over holidays

GameStop sees weaker-than-expected new software sales over holidays

January 14, 2014 | By Kris Graft

GameStop today reported a boost in total sales during the nine-week holiday period ended January 4, as the market saw the release of next-generation consoles Xbox One and PlayStation 4.

Total global sales were $3.15 billion for the period, up 9 percent year-on-year.

But that modest boost in sales hid a downward trend -- sales of new software at GameStop took a hit, falling 23 percent year-on-year to $1.08 billion for the holidays.

The reason? GameStop said strong sales of next-generation software were not enough to offset a "greater-than-expected" decline in new current-gen software for Xbox 360 and PS3.

Sales of preowned products -- which have fat gross margins of nearly 50 percent -- were up 7 percent to $567.3 million. New hardware, driven by the launches of Xbox One and PS4, brought in $1.05 billion in sales, a 100 percent year-on-year increase.

While the game industry is transitioning to a new generation of game consoles, GameStop continues to be in a transition of its own, as its physical-based retail business comes under attack from digital.

Though large amounts of people do prefer discs, GameStop is sealing the fate of significant swaths of its own business, as it sells hardware that gives customers the means to buy games via digital storefronts, circumventing physical retail altogether.

GameStop is seeing some gains as it attempts to capitalize on digital distribution. The company said digital receipts were $207.3 million, up 15 percent, while mobile revenues were $95 million, up 24 percent.

But with physical games being the bread-and-butter of GameStop, the lower software sales in light of new consoles -- combined with fiscal Q4 profit estimates that were under market expectations -- caused investors to dump shares, which fell around 18 percent this morning to $37.

GameStop will report its full quarterly fiscal results in the coming weeks.

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