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Thursday, November 20, 2008
GameStop Beats Estimates, Issues Cautious Outlook
By Matt Egan
FOXBusiness
GameStop (GME) proved that not even video games are immune to the economic turmoil slamming retailers, as it posted a 10% decline in third-quarter earnings and weighed in with disappointing guidance for the current quarter.
The company earned $46.7 million, or 28 cents per share, in the third quarter, down from $52 million, or 31 cents per share, a year ago.
GameStop’s revenue rose 5.2% in the third quarter to $1.7 billion, falling short of the $1.82 billion analysts had forecasted.
Analysts polled by Thomson Reuters had expected weaker earnings of 37 cents per share.
The news sent shares of GameStop to fresh two-year lows.
“Despite the dramatic decline of the global economy and its severe impact on the entire retail industry, GameStop had a strong quarter,” CEO Daniel DeMatteo said in a statement. We believe that video games provide real entertainment value to consumers in these trying economic times and will be sought out gift purchases for the holiday season.”
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Top 5 Selling Video Games of 3Q |
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Madden NFL 2009 by Electronic Arts |
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Star Wars: The Force Unleashed by Lucas Arts |
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Fable 2 by Microsoft |
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Fit by Nintendo's Wii |
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Guitar Hero World Tour by Activision |
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Source: GameStop |
Sales were driven by a number of hot-selling video games, including Electronic Arts’ (ERTS) “Madden NFL 2009,” Microsoft’s (MSFT) “Fable 2” and Activision’s (ATVI) “Guitar Hero World Tour.”
Looking ahead, GameStop tempered its fourth-quarter earnings and sales forecast, citing weakness in consumer spending. GameStop now sees earnings rising up to 18% from a year ago to a range of $1.29 to $1.34 per share. The company sees same-store sales growth slowing to a range of 4% to 5%.
However, analysts polled by Thomson Reuters were expecting a stronger profit forecast of $1.37 per share in the current quarter.
For the full year, GameStop sees earnings growth of up to 33% to a range of $2.35 to $2.40 per share. The company sees same-store sales growth of 10% to 11% for the full year and total sales rising in the range of 21% to 22%.
Even though GameStop issued cautious outlook for the fourth quarter, the retailer said it sees “encouraging” recent trends as same-store sales increased 11% last month and rose by 20.5% in the first two weeks of November despite the “unprecedented economic and financial crisis.”
