Market Overview

GameStop Sales Plummet, Can the Video Game Retailer Survive?

Despite a plethora of positive hype leading up to the holiday shopping season, GameStop (NYSE: GME) has announced that its comparable store sales decreased 4.4 percent worldwide.

In America, GameStop endured a comparable store sales decrease of 3.5 percent. The losses were even greater overseas, with international sales plummeting 6.4 percent.

"GameStop experienced mixed results during the holiday selling period," GameStop CEO Paul Raines said in a company release. "Our successful Wii U launch, strong digital growth and continued momentum in the mobile space were countered by a decline in store traffic.

"As a result, GameStop expects its fourth quarter 2012 earnings per share results to be at the low end of its current guidance range. Our strong market share positions us well for the future, and we look forward to new product launches in 2013."

In other words, GameStop is at the mercy of game publishers and console manufacturers.

During the holiday period, GameStop said that new hardware sales decreased 2.7 percent despite the release of Nintendo's (OTC: NTDOY) Wii U. The retailer sold 320,000 of the more than two million Wii U consoles that have been sold worldwide.

GameStop also announced that the sale of new video games decreased 5.1 percent "as frontline title releases could not offset a decline in overall store traffic." Those "frontline title releases" include Activision's (NASDAQ: ATVI) Call of Duty: Black Ops II, which earned more than $500 million in 24 hours. Halo 4, another frontline title, earned $220 million on its first day of release.

"The pre-owned category declined 15.6% as limited inventory due to fewer new titles released throughout 2012 and less promotional activity negatively impacted sales compared to last year," GameStop revealed.

That last figure should be particularly interesting to game publishers that are against the sale of used games. For years they have tried to diminish the trade-in business by employing gimmicks that only hurt consumers. Little did they know that the simplest way to end the sale of used games is to stop releasing new software altogether.

In addition to the aforementioned declines, GameStop also raised its digital receipts by 40 percent. Mobile business sales came in at $76.5 million, though GameStop did not provide any comparisons to last year's figures. However, it did announce that global e-commerce sales improved 20.5 percent.

Finally, the video game retailer lowered its Q4 guidance. The company expects its comparable store sales range to come in at -7.0% to -4.0% during the fourth quarter. For the full year, comparable store sales are anticipated at -9.0% to -7.5%.

Investors reacted to the new by promptly bailing on the stock. GameStop is currently down more than six percent. Despite enduring a rocky year for the game industry, the retailer gained more than five percent in 2012.

Follow me @LouisBedigianBZ

Posted-In: gamestopNews Tech Best of Benzinga

 

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