GameStop Tops Profit Estimates Amid Declining Games Sales
GameStop Corp. (GME) the world’s largest video-game retailer, gave a profit forecast for the holiday- season quarter that topped some analysts’ estimates in what it called a “tough video-game market.”
For the fiscal fourth quarter, the company’s peak holiday earnings period, profit is expected to be $2.07 to $2.27 a share, Grapevine, Texas-based GameStop said today in a statement. The midpoint of $2.17 is 1 cent above the average of estimates compiled by Bloomberg.
Investors are weighing whether the release of Nintendo Co.’s Wii U, the video-game industry’s first new home console in six years, will spur purchases or confirm declining interest in packaged games costing $60 each. The Wii U, which goes on sale on Nov. 18 in the U.S., replaces an earlier device, released in 2006, that led industry sales.
For the third quarter ended Oct. 27, GameStop posted a net loss of $624.3 million, or $5.08 a share, after impairment and goodwill costs of $678.8 million. That compared with net income of $53.9 million, or 39 cents, a year earlier. Excluding the impairment expenses, earnings of 38 cents topped the 33-cent average of estimates.
Sales declined 8.9 percent to $1.77 billion, compared with projections of $1.79 billion.
The video-game industry is entering the U.S. holiday season amid an extended drop in sales. Existing consoles, which include Microsoft Corp.’s Xbox 360 and Sony Corp.’s PlayStation 3, are aging, while mobile and online options attract players. Last year, the fourth quarter accounted for 51 percent of GameStop’s annual profit.
The company said on Oct. 26 it will open about 80 GameStop Kids stores featuring products including toys and collectibles for children under age 13 in time for holiday shopping.
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