GOOD READS

Soft Holiday Sales for GameStop

RELATED QUOTES

SymbolPriceChange
AMZN324.58
GME39.91

Shares of GameStop Corporation (GME) dipped 6.3% to close at $23.19 on Tuesday, following the video game retailer’s dismal holiday sales performance on account of weak store traffic count. This offset solid digital growth and muted the launch of Nintendo's Wii U, compelling the Grapevine, Texas based company to trim its forecasts and thus, hinting at troubled waters for the video game business.    

GameStop’s holiday sales for the nine-week period ended December 29, 2012 dropped 4.6% to $2.88 billion. Comparable-store sales fell 4.4%, reflecting a decline of 3.5% and 6.4% at its U.S. and international comps, respectively.

By sales mix, new video game hardware sales edged down 2.7%, despite having sold 320,000 Nintendo Wii U units globally, whereas new video game software sales dropped 5.1%. The pre-owned category sales plunged 15.6% due to lower number of new titles released in 2012 and less promotional strategies undertaken.

The disappointing holiday sales results persuaded management to become more cautious on their outlook, which now envisions comparable-store sales to decrease between 4% and 7% during the fourth quarter and in the range of 7.5% to 9% in fiscal 2012. Earlier, GameStop had projected comparable-store sales in the range of 1% up to 7% down for the fourth quarter, and to decline between 6% and 9% in the fiscal year.

GameStop also restricts its fourth-quarter fiscal 2012 earnings outlook at the lower-end of the previously provided guidance range of $2.07 to $2.27 per share. The current Zacks Consensus Estimate for the quarter is $2.16. Consequently, we could witness a correction in the Zacks Consensus Estimates in the coming days as well in the rank of the stock, which currently stands at Zacks Rank #2 (Buy).

On the brighter side, Digital receipts surged over 40% year over year, whereas Mobile sales, consisting of tablet and pre-owned iDevice products, came in at $76.5 million during the holiday season. GameStop, at its last earnings call had guided mobile sales in the range of $150 to $200 million for fiscal 2012, and has so far achieved more than $160 million. The company also informed that worldwide e-Commerce sales soared 20.5% during the holiday season versus the prior-year period.

GameStop, which competes with Amazon.com Inc. (AMZN), also continued with its shareholder friendly moves during the holiday period, and bought back 458,000 shares at a price of $25.51 per share, aggregating $11.7 million. The company still has about $488.3 million at its disposal under its share buyback program.

Let’s Conclude

The slump in the video gaming industry persists due to increased online gaming activities, and shifting preferences toward tablets and mobile phones from traditional game consoles. Consumers increasing accessibility to video games and PC entertainment software over the Internet could hit the sales of packaged goods and used games, and impede future growth. Consequently, GameStop continues to branch out and has reinvented itself as a mixed retailer of physical and digital gaming and electronics products. The company’s venture in digital, iDevice and gaming tablet businesses would be accretive.

Currently, we have a long-term Neutral recommendation on the stock.

Read the Full Research Report on AMZN

Read the Full Research Report on GME

Zacks Investment Research



More From Zacks.com

Quiz: How well do you know India's economy?

Question 1

Which of these products is India the world's largest producer of?

Poll Choice Options
  • Wheat
  • Rice
  • Milk
1
2
3
4
5
6
7
8
9
10

Latest News

  • Air India seeks to lease 14 Airbus A320 aircraft

    Air India Ltd [AIN.UL] is seeking to lease 14 Airbus A320 aircraft, according to a tender document posted on the state-run carrier's website. Air India has asked for bids for up to six-year-old A320 aircraft ... …

  • Sri Lanka opposition protest to block Packer's casino plans

    Hundreds of Sri Lankan opposition party members marched in protest in Colombo on Thursday to pressure the government to stop Australian gambling tycoon James Packer from opening casinos in hotel projects planned by his Crown Resorts Ltd (CWN.AX). President Mahinda Rajapaksa's coalition government holds a two-thirds majority in parliament, but its stance on casinos has drawn flak from Buddhist and other religious leaders, opposition parties and even from within its own ranks. Currently, there …

  • Met office rules out surplus monsoon in 2014
    Met office rules out surplus monsoon in 2014

    India is likely to experience below-average monsoon rainfall in 2014, the government's weather office said on Thursday, if the El Nino weather pattern affects the four-month-long rainy season. The monsoon is vital for India as half of its farmland lacks irrigation. To cut dependence on rains, India plans to expand its farmland under irrigation by at least a tenth by 2017. Rainfall is expected to be 95 percent of the long-term average, with a margin for error of plus or minus 5 percent, …

  • Debit cards with an extended credit limit!

    The use of plastic money and the increasing popularity of such formats have revolutionized the way payments are made and received. The most popular types of plastic … Read more » …

  • Nokia says India plant unlikely to be part of Microsoft deal
    Nokia says India plant unlikely to be part of Microsoft deal

    Nokia said that due to an ongoing tax dispute, its Indian mobile phone handset plant was unlikely to be included in a deal due to be concluded on Friday for the sale of its global handset business to Microsoft. Nokia will instead operate the factory as a contract manufacturing unit for Microsoft after the deal, a spokeswoman for the Finnish company's Indian unit said on Thursday. "It's highly unlikely that the plant will transfer, given that the (deal) closing with Microsoft is tomorrow," the …

IN-DEPTH ANALYSIS & INTERVIEWS

  • Leaderspeak with Vikram Limaye

    Vikram Limaye MD & CEO, IDFC Ltd shares many firsts from his life. …

  • The Greening of the House of Tatas

    How a dedicated team converted a 90-year-old heritage structure into a benchmark for environment-friendly buildings. …

  • Appy Voting

    Mobile and online apps, seeking to inform or influence voters, have been more active than ever before in this election. …

  • In the crosshairs

    Why the future of FDI in multi-brand retail looks bleak after the polls. …

  • Deserving the honour

    How do the winners of the two new banking licences - microfinance lender Bandhan Financial Services and infra institution IDFC Ltd - measure up to the challenges of operating as full-fledged banks? …

  • A Samurai from Chandigarh

    Advertising veteran Sandeep Goyal is disarmingly frank as he recounts his years with Dentsu. …

  • Falling in line

    Global investors gear up to working with Narendra Modi despite reservations about his secular credentials. …

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    16.52-0.33-1.96%
    UNITECH.BO
    14.31-0.27-1.85%
    SUZLON.BO
    120.40+7.00+6.17%
    FRL.BO
    66.05+4.10+6.62%
    MANGCHEM.BO
    54.40+1.65+3.13%
    HCLINFO.BO
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
    16.20+2.70+20.00%
    JAGSONPH.BO
    53.50+8.90+19.96%
    RUSHIL.BO
    40.45+6.45+18.97%
    RCIIND.BO
    63.95+8.90+16.17%
    MRPL.BO
    24.00+3.10+14.83%
    NELCAST.BO
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    10.95-10.95-100.00%
    4THGEN.BO
    17.30-17.30-100.00%
    ALFAICA.BO
    16.81-16.81-100.00%
    AMAL.BO
    11.73-11.73-100.00%
    BORAX.BO
    29.95-29.95-100.00%
    BRADYM.BO
  •  
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

    •  
      Sign-in to view quotes in your portfolios.