GameStop Holiday Sales Fall Short in 2012

Andrew Klips  |

GameStop Corp. (GME) reported sales on Tuesday from the nine-week holiday period ended December 29, 2012 that signaled consumers didn’t spend as much time in their stores the past Christmas.  GameStop has been facing significant headwinds on many levels, including the continuing emergence of games that are available in a downloadable format, e-commerce competitors and the ending of a cycle of existing games and consoles that are slated to release new versions in 2013.

The world’s biggest multichannel video game retailer said that total global sales slipped by 4.6 percent to $2.88 billion during the holiday shopping season in 2012 compared to 2011 sales.  Comparable stores in the U.S. saw a 4.4 percent drop in sales, while sales international locations demurred by 6.4 percent.  With the weaker performance, the Grapevine, Texas-based company narrowed its comparable store sales range for the fourth quarter to -7.0% to -4.0% and the full year to -9.0% to -7.5%.

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The results were mixed for the retailer during the quarter.  “Our successful Wii U launch, strong digital growth and continued momentum in the mobile space were countered by a decline in store traffic,” said Paul Raines, chief executive officer at GameStop.  The chief was referencing a 2.7 percent growth in new hardware, fueled in part by the sale of 320,000 Nintendo Wii U units.  Video game software, however, fell by 5.1 percent and pre-owned products were stung with a 15.6 percent decline because fewer new game releases in 2012 kept inventory light.

Digital receipts climbed by 40 percent and global e-commerce sales rose by 20.5 percent compared to 2011’s holiday season.  In November, GameStop said that it would be closing 200 stores in response to the tough industry.

The company added that it now expects its fourth quarter earnings to be at the low end of its current guidance.  Wall Street analysts are expecting about $3.56 billion in sales for the quarter and earnings of $2.16 per share.

GameStop also said that during the holiday period it bought-back 458,000 shares of its common stock at an average price of $25.51, or $11.7 million worth.  At the end of the year, it still has about $488.3 million remaining of its repurchase plan.

Last week, shares of GameStop took a hit as Sony Corporation (SNE) filed for a patent to protect technology that will keep future devices from playing used games, sending GME shares lower by 5 percent on January 3.  Used games are a cornerstone of the GameStop business model.  Gamers are expecting the release of Sony’s PlayStation 4 later this year, although there aren’t any indications that the new technology to reject used games will be a part of it.

Today’s news of weak holiday sales has the GameStop stock tumbling 7 percent lower than Monday’s close.  About one hour into the day, shares are trading at $23 each.

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