(Updates with shares falling 13%)
DOW JONES NEWSWIRES
GameStop Corp.'s (GME) shares fell 13% Thursday after reporting
that fiscal first-quarter earnings rose 13% on higher sales and
margins but forecasting current-quarter profit below analysts'
expectations.
Shares were last trading down $3.63 to $22.84.
The company forecast second-quarter earnings per share of 28
cents to 33 cents on a same-store sales decline of 8% to 11% due to
slowing hardware sales and last year's stimulus checks goosing
results. Analysts surveyed by Thomson Reuters expected 40
cents.
In premarket trading, GameStop's shares were down 11% at $23.51.
Through Wednesday's session, the stock was up 22% in 2009.
Shareholders have worried the slumping economy will pinch sales
of video games and consoles, especially as competition from other
retailers like Best Buy Co. (BBY) and Wal-Mart Stores Inc. (WMT) is
rising.
GameStop had a virtual monopoly in the used-games market, but is
now facing competition from Amazon.com Inc. (AMZN), which launched
a service allowing customers to trade in games for store credit.
That took aim at a key part of GameStop's business and a big reason
for the company's strong performance amid the recession.
For the period ended May 2, the company posted income of $70.4
million, or 42 cents a share, up from $62.1 million, or 37 cents a
share, a year earlier. The latest results included 1 cent in costs
from retiring $50 million in debt. In March, the company forecast
40 cents to 42 cents, slightly above analysts' then-estimates.
Revenue increased 9.2% to $1.98 billion as same-store sales fell
1.5% amid the recession in Europe and a slowdown of console sales
late in the quarter. Analysts polled by Thomson Reuters most
recently expected $2 billion.
"During the quarter GameStop sustained its strong earnings
growth momentum and exceeded earnings guidance despite
less-than-planned comparable store sales," said Chief Executive
Daniel DeMatteo. He added the company expects the second half of
this fiscal year to be stronger than the first half was because of
a "wide-ranging" lineup of new titles.
Gross margin rose to 27.4% from 26.1%. New-game software sales
slid 2.8% while new hardware sales rose 17%. Sales of used games
jumped 32%.
GameStop opened 114 new stores during the quarter. It had said
in February it plans to open more than 400 stores this year.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com
(Ben Charny contributed to this report.)
