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TheStreet Open House

GameStop Forecast Flattens Shares

SAN FRANCISCO - Shares of video-games retailer GameStop (GME - Get Report) slumped after the company beat analysts' first-quarter estimates but forecast earnings for the current quarter and fiscal year that were merely in line with Street expectations.

Shares of GameStop were down $4.76, or 9.4%, to $46.09 in recent trading.

Profit for the quarter was $62.1 million, or 37 cents a share vs. $24.7 million, or 15 cents a share, a year earlier. Excluding items, the company earned 38 cents a share, beating analysts' expectations by 3 cents a share.

Revenue increased 41.8% to $1.81 billion, surpassing analysts' expectations of $1.75 billion for the quarter.

Comparable-store sales increased 27.1% during the first quarter.

New video game software sales grew 72%. The top-five selling games during the quarter were Take-Two's (TTWO) Grand Theft Auto IV, with only five days of sales at the end of the quarter; Super Smash Bros. Brawl and Mario Kart WII from Nintendo; Rainbow Six: Vegas 2 from Ubisoft; and Electronic Arts' (ERTS) Army Of Two, said GameStop.

"The installed base of video game consoles grew 34% in 2007, or nearly 31 million units, the highest incremental growth in the history of the business, and we are forecasting that hardware unit sell-thru will match these levels in 2008," said R. Richard Fontaine, chairman and chief executive officer for GameStop in a statement.

Gross margin for the quarter was 26.1%, down from 27.2% a year ago. The decline came primarily from the hardware sales category, said Matt Hodges, director of investor relations for GameStop.

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