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GameStop disappoint as competition grows

Thursday, March 27 16:30:21

GameStop, the world's No. 1 retailer of videogame products, forecast full-year earnings below market expectations as more games are sold online and it faces increased competition from big retailers offering trade-ins for used games.

GameStop shares fell as much as 9.3 percent in morning trading on Thursday, making the stock one of the top percentage losers on the New York Stock Exchange.

The company, which reported a weaker-than-expected fourth-quarter profit, said it would close about 2 percent of its stores this year.

GameStop's sales largely depend on consoles made by Sony Corp, Microsoft Corp and Nintendo Co Ltd , which increasingly must compete with games available on tablets and smartphones in the $90 billion videogame market.

Console gamers are also buying more games online.

"I do believe that the number of people that are opting to download games with the new consoles is much higher than it was with the old consoles," Longbow Research analyst James Hardiman told Reuters. "For me that's the biggest reason why I think this company has risk."

Sony and Microsoft both launched new-generation consoles in November.

GameStop, whose competitors include Wal-Mart Stores Inc , Best Buy Co Inc and Amazon.com Inc, forecast full-year earnings of $3.40-$3.70 per share and revenue growth of 8-14 percent, which would work to $9.76 billion-$10.30 billion.

Hardiman said that even taking into account share repurchases through the year - which he estimated would add 11 cents per share - the lower end of the company's forecast would still miss the market average.

Analysts expect earnings of $3.76 per share on revenue of $9.85 billion, according to Thomson Reuters I/B/E/S.

The Grapevine, Texas-based company said in January that sales of games for older versions of Xbox and PlayStation consoles were sagging.

GameStop's used-game business, historically its most profitable, is facing new competition from retailers such as Walmart, which said this month it would allow U.S. shoppers to trade in used games for anything from groceries to gadgets. Sony also plans to launch a service to sell older games online.

The company's net profit fell to $220.5 million, or $1.89 per share in the quarter ended Feb. 1 from $261.1 million, or $2.15 per share, a year earlier.

Revenue rose to $3.68 billion from $3.56 billion, helped mainly by demand for new game consoles from Sony and Microsoft. (Reuters)