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EA's Riccitiello: Despite Retail Reluctance, Industry Will Bounce Back In 2009

Although retailers are currently acting cautiously, Electronic Arts CEO John Riccitiello expects greater confidence to drive higher orders in the second half of 2009.
Although retailers will likely continue to order relatively restrained amounts of video game inventory in the immediate future, Electronic Arts CEO John Riccitiello expects greater confidence to drive higher orders in the second half of 2009. "We continue to see a challenging environment," said Riccitiello in an earnings conference call today. "The retail channel is cleaner than it was one quarter ago, but retailers continue to be cautious...waiting for confirmation of strong sell-through before committing to more inventory." Although retailers currently "remain conservative," the CEO added that they are becoming "cautiously optimistic," and "in some cases are increasing shelf space [for video games] at the expense of other categories." Riccitiello's comments echo those made this week by analyst Michael Pachter, who believes many investors are unduly pessimistic about the upcoming performance of the video game market, even if year-over-year comparisons are unflattering in the very immediate future. "Comparisons remain difficult and low single-digit growth is likely through July, but we expect a return to double-digit growth in August," said Pachter. Still, he noted, "should the sales weakness continue in April, we expect many to see this as a signal that the recession is upon us." Although tracking firm NPD reported year-over-year sales increases for the first two months of 2009, that trend was broken in March, which saw a 17 percent decline. Riccitiello sees the negative year-over-year comparisons persisting through June, but said EA expects the situation "to improve in the back half of the year [thanks to] a stronger [software] slate and easier comparisons" to last year's games.

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