GameStop 1Q Profit Slumps as Game Demand Softens

GameStop (NYSE:GME) reported a lower first-quarter profit and sales and provided a tepid look for the current quarter as it continues to cope with soft demand for video-game hardware and software.

The world’s largest video-game retailer reported net earnings of $72.5 million, or 54 cents a share, compared with a year-earlier $80.4 million, or 56 cents, matching average analyst estimates in a Thomson Reuters poll.

Revenue for the three months ended April 28 was $2 billion, down 12.2% from $2.28 billion a year ago, missing the Street’s view of $2.05 billion.

“GameStop continues to outperform the market in new game sales through the late stages of this console cycle,” the company’s chief executive, Paul Raines, said in a statement.

Raines said GameStop achieved its profit target due to gross margin expansion and contributions from its pre-owned, mobile and digital business. He expects those segments to fill the profitability gap as the retailer transitions into the new console cycle.

However, sales still slumped on worse-than-expected hardware and software demand for video games. Store traffic was also lower.

Grapevine, Texas-based Gamestop expects comparable store sales to fall 11% to 5% in the current quarter and sees earnings per share of 10 cents to 18 cents. Analysts are looking for a better profit of 26 cents.

For the full-year, the retailer sees earnings in the range of $3.10 to $3.30 a share on a 5% decline to flat comparable sales. The Street is expecting fiscal 2012 earnings of $3.20.