It's no fun these days, making games. Indeed, while video game sales have been resilient, buoyed by the release of new systems and blockbuster titles, GameStop (GME) - Get Report said on Thursday that this strength could be waning.
While the video game and entertainment software retailer posted a 13% climb in the first quarter, management warned that second-quarter earnings are facing strong comparisons.
During the quarter, GameStop earned $70.4 million, or 42 cents a share, beating expectations by a penny. This compares with a profit of $62.1 million, or 37 cents, in the year-ago period.
Sales jumped 9% to $1.98 billion from $1.81 billion last year, boosted by the launch of Nintendo DSi handheld system and strong releases of Capcom's Resident Evil 5 and Street Fighter IV. These titles, however, could not compare to the tremendous success of Grand Theft Auto IV from Take Two Interactive and Nintendo's Super Smash Bros. Brawl released in 2008.
New video game software sales dropped 2.8%, but lower-priced used products soared 31.9%.
Going forward, the company says second-quarter profit should land between 28 cents to 33 cents a share.
"In the second quarter, like the first, we face very strong comparisons to the prior year period due to the unprecedented number of blockbuster titles released in the first half of 2008 and a significantly more brittle global economy," CEO Daniel DeMatteo said in a statement.
Jim Cramer warned during the Lightning Round of his "Mad Money" broadcast on Tuesday, that
and game stocks have been played out.
Full-year earnings should fall between $2.83 and $2.93 a share.
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