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GameStop Shows Positive Financials, So-So Outlook

Representatives from North American video game retailer GameStop have reported the company’s second quarter earnings, for the period ended July 30th. During this time the...
Representatives from North American video game retailer GameStop have reported the company’s second quarter earnings, for the period ended July 30th. During this time the company reported that revenue rose by an impressive 20.3 percent to $415.9 million, and profit for the quarter increased marginally to $7.9 million, compared with $7.7 million at the same time last year. The company also reported video game software sales as increasing by 16 percent, led by titles such as NCAA Football 06, Star Wars: Episode III – Revenge of the Sith and Pokémon Emerald. The PSP portable console was noted as an important driver of comparable store sales, which increased 6.2 percent during the second quarter. The PSP was also the primary factor in hardware sales increasing by 40 percent on the same time last year. GameStop, which is not yet figuring its planned merger with fellow U.S. retail giant Electronics Boutique into its financials, also pointed out that figures include a $1.1 million write-off of used inventory of Grand Theft Auto: San Andreas, following its much publicized ratings change from Mature to Adults Only. "We are pleased with our second quarter results," said R. Richard Fontaine, chairman and CEO. "I am particularly encouraged that we continued to execute our business plan and focus on our customers in light of the very exciting, and potentially distracting, announcement regarding our pending merger with Electronics Boutique." Regarding the merger, the company announced that the waiting period under the Hart-Scott-Rodino Improvements Act had expired and that both companies are now responding to questions from the Securities and Exchange Commission. The merger is now expected to close in late September or early October. The only possible downside to the results was the outlook going forward - the company expects comparable store sales to decrease between 8 to 10 percent in the third quarter, due to a relative lack of big name titles compared to last year. However, full year results are still expected to see diluted earnings per share of between $1.30 to $1.40, without taking into consideration the planned merger. Therefore, after an initial drop, GameStop shares were up noticeably, increasing 5% to $31.00 in mid-day trading on the NASDAQ.

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