(Adds comments from CEO interview, more details.)
DOW JONES NEWSWIRES
GameStop Corp.'s (GME) fiscal second-quarter earnings fell 32%
amid slowing sales of video consoles, as well as tough comparisons
owing to prior-year releases of hit games, and higher expenses.
The videogame and console retailer also cut its 2009 earnings
forecast and projected third-quarter earnings below analysts'
expectations.
Shares were down 6% at $23.67 in recent trading. The stock is
down roughly 45% in the past year, though it has rallied by nearly
half since November.
GameStop now expects 2009 earnings of $2.40 to $2.64 a share,
from its prior guidance of $2.83 to $2.93 a share. Analysts
recently were looking for $2.76. GameStop also expects same-store
sales to decline 4% to 8%.
For the fiscal third quarter, the company expects earnings of 27
cents to 33 cents and a same-store-sales decline of 6% to 11%.
Analysts were looking for 41 cents.
Still, Chief Executive Daniel DeMatteo expects the industry to
rebound in the next fiscal year, partly because a number of game
releases expected in the second half were pushed into next year by
game publishers, plus the company expects that since Sony Corp.
(SNE) on Tuesday slashed its price for PlayStation 3, other
manufacturers will follow, attracting more consumers and spurring
game sales as well.
"Typically by now the prices would have been reduced, but it
didn't occur," DeMatteo said. The prior-year quarter also included
government stimulus checks, which helped drive sales of big-ticket
items, he said.
Videogame industry sales have weakened in recent months, after a
record performance in 2008. The slump is partly owing to the
recession, and partly because several of last year's top titles
were released in first half such as Mario Kart, Wii Fit, Super
Smash Bros.: Brawl, and Grand Theft Auto IV. Console sales also
have been hurt by the lack of new blockbuster games.
While the recession has played to GameStop's strength in
higher-margin used videogames, rivals such Best Buy Co. (BBY),
Amazon.com Inc. (AMZN), Toys 'R' Us Inc. and Wal-Mart Stores Inc.
(WMT) have been testing programs in the segment. Used-game sales
remained a bright spot for GameStop in the quarter, rising 19%.
For the quarter ended Aug. 1, GameStop reported a profit of
$38.7 million, or 23 cents a share, down from $57.2 million, or 34
cents a share, a year earlier. The company in May projected 28
cents to 33 cents, below analysts' views at the time.
Revenue decreased 3.7% to $1.74 billion, as same-store sales
tumbled a more-than-expected 14%. The company in May expected a
same-store drop of 8% to 11%.
Analysts polled by Thomson Reuters most recently were looking
for revenue of $1.75 billion.
Gross margin rose to 28.5% from 26.8%.
DeMatteo said last year's second quarter was "very aberrant", as
sales jumped 20%, helping to support the company's expenses, while
this year was more typical.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
tess.stynes@dowjones.com