Economy, Price Cuts Dragged GameStop Holiday Sales

GameStop's holiday sales were flat in 2009, and same store sales fell 8.6 percent to $2.86 billion, revealing what's likely the first clue to how the industry's 2009 ultimately closed out.
GameStop's holiday sales were flat in 2009, and same store sales fell 8.6 percent. The leading video game specialty retailer revealed results for the nine-week season ended January 2, 2010, in what's likely the first clue to how the industry's 2009 ultimately closed out. Total sales came to $2.86 billion -- a number the retailer stresses is "still the second-highest earnings year in GameStop’s history, coming off a record fiscal year 2008." Sales of new games rose 4 percent during the holiday period, led by Activision's Call of Duty 4: Modern Warfare. Other key sellers in GameStop's holiday top five were Ubisoft’s Assassin’s Creed II, Nintendo’s New Super Mario Bros. Wii, and Valve's Left 4 Dead 2 and BioWare's Dragon Age: Origins, both via Electronic Arts. And although GameStop says its sales of used software grew 10 percent and "outperformed the sales trends in general," this key component of the retailer's business was also affected, coming in less than forecast thanks primarily to economic conditions. Hardware sales were down 8 percent year over year, however, thanks to console price cuts that took place alongside actual unit sales declines. Says GameStop CEO Dan DeMatteo: "Despite a kick start to this year’s holiday selling season with several major title launches, sales momentum was impacted in December by economic weakness in all global operating segments, winter storms at peak shopping periods in December, and unexpected shortages of key products such as New Super Mario Bros. Wii, Nintendo Wii and Sony’s PlayStation 3 consoles." "Although we are still in the planning stages for our fiscal year 2010, we expect that strong PlayStation 3 demand, an exciting title line-up, combined with anticipated economic recovery, will all be factors that should drive software growth and therefore GameStop earnings in 2010," says the company. Based on its holiday performance, the company lowered its fourth quarter and full year guidance; for the fourth quarter it now expects $1.25 per share, down from $1.29, and for the full year it expects $2.23 per share, down from $2.27. It lowered its expectations for comparable store sales a full percent for both fourth quarter and full year, but says its total sales grew 2 to 3 percent during 2009.

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