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Analyst predicts healthy growth for December U.S. retail

Analyst predicts healthy growth for December U.S. retail

January 9, 2012 | By Eric Caoili

Ahead of NPD Group's U.S. retail sales data for last month, Wedbush analyst Michael Pachter expects that December's software sales at retail grew by 2 percent year-over-year to $2.41 billion, while hardware sales dropped by 12 percent.

That would make December the fourth consecutive month of retail software growth for the game industry, following the best November sales ever recorded ($1.67 billion), led by big releases like Activision's Call of Duty: Modern Warfare 3 and Bethesda's Elder Scrolls V: Skyrim.

While the analyst predicts that releases on high-definition consoles will be the primary drivers of game sales, he notes that Nintendo platforms will account for $890 million, or 37 percent, of the total software forecast (DS - $205 million, 3DS - $89 million, and Wii - $596 million).

Hardware sales, however, is a different story. Pachter forecasts that Wii system sales will be down 53 percent year-over-year, while DS sales will see a "precipitous decline" by 89 percent to 275,000 units. He believes the 3DS sold 1.625 million units.

He adds that Xbox 360 hardware sales will grow 27 percent to 2.35 million for the month, followed by 1.7 million (up 41 percent) PS3 units: "Overall, we expect hardware unit sales to be down 12 percent year-over-year, with current generation console hardware unit sales down 5 percent and handheld hardware unit sales down 24 percent."

GameStop's recently released holiday sales report supports that outlook for weakened hardware sales. During the nine weeks leading up to December 31, hardware sales for the company fell by 19.6 percent year-over-year, due in part to the lack of new home consoles introduced to the market in 2011.

"While it is almost a certainty that 2011 will end up as the third consecutive year for declining software sales, we expect a solid finish in December to drive prices for the publisher stocks higher," says Pachter.

He continues, "Should December sales come in at our estimate of up 2 percent year-over-year, 2011 software sales will end up down only 2 percent, a marked improvement over the down 9 percent that sales were trending through August."

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