March 26 (Bloomberg) -- GameStop Corp., the world’s largest video-game retailer, said fourth-quarter profit rose 22 percent on holiday sales of “Guitar Hero” and Nintendo Co.’s Wii.

Net income increased to $232.3 million, or $1.39 a share, from $189.8 million, or $1.14, a year earlier, the Grapevine, Texas-based company said today in a statement. This quarter, the company forecasts profit of 40 cents to 42 cents a share, higher than the 39-cent estimate of analysts.

Video-game sales are bucking the recession. In February, U.S. retail sales of consoles, games and accessories increased 10 percent from a year earlier, according to researcher NPD Group Inc. The industry will expand 5 percent to 10 percent in 2009, with help from Nintendo’s new DSi handheld device, GameStop Chief Executive Officer Dan Dematteo said.

“This is one of the most exciting things we’ve had in a while,” Dematteo said in an interview.

The DSi goes on sale in the U.S. on April 5, and Dematteo predicts initial sales will exceed the device’s previous two generations, which have surpassed 100 million worldwide.

GameStop fell 63 cents to $26.21 at 4:02 p.m. in New York Stock Exchange composite trading. The shares had risen 24 percent this year before today.

Digital Distribution

GameStop, with more than 6,200 stores in 17 countries, faces increased competition for the sale of used video games, which account for more than 20 percent of revenue. Amazon.com Inc., the world’s largest Internet retailer, entered the market this month by letting customers trade old games for gift cards.

Publishers also are looking at digital means of delivering games. OnLive, a new online-based system from WebTV creator Steve Perlman, will stream games to users through an Internet connection instead of requiring a physical console or discs likes those purchased at GameStop.

Dematteo said digital distribution is unproven.

“Something that works in a lab with relatively few consumers playing doesn’t necessary mean something will scale for thousands and thousands of consumers,” Dematteo said.

Revenue jumped 22 percent to $3.49 billion in the 13 weeks ended Jan. 31, matching a preliminary report the company released last month. Excluding merger-related income, profit was $1.34 a share, also in line with the preliminary report.

During the holiday shopping season, GameStop reported strong sales of Nintendo products such as “Wii Fit,” as well as Activision Blizzard Inc.’s “Guitar Hero,” “Call of Duty: World at War” and “World of Warcraft: Wrath of the Lich King.”

Same-store sales this quarter will range from unchanged to an increase of 2 percent, GameStop said in the statement. Analysts estimated sales of $1.95 billion.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

Last Updated: March 26, 2009 16:08 EDT