Why You Shouldn't Quit GameStop
Video-game retailer GameStop ( GME) reported a blockbuster holiday season and boosted its fourth-quarter earnings outlook. GameStop said sales for the nine-week holiday period ended Jan. 5 rose 34.7% to $2.33 billion from $1.78 billion a year ago. Comparable-store sales increased 20%.
As a result, the company raised its fourth-quarter earnings guidance to $1.09 to $1.10 a share. Analysts polled by Thomson Financial were expecting earnings of $1.01 a share. For the full year, the company forecast earnings in the range of $1.75 to $1.76 a share, 13 cents higher than its guidance range issued on Nov. 20, and above analysts' expectations of $1.66 a share. The news didn't help shareholders, however, as the stock had fallen $2.56, or 4.7% to $52.55. The selloff continues GameStop's downturn since an intraday high of $63.68 set, perhaps unsurprisingly, on Dec. 26. The company also raised its fourth-quarter sales guidance to a range of 15.5% to 16.5% from 7% to 9% forecast earlier. Full-year comparable-store sales are now expected to be in a range of 23.5% to 24.5%. Video game software sales grew 45%, with the installed base of the latest generation of consoles such as Sony's ( SNE) PlayStation 3 and Nintendo's Wii tripled from last year, said GameStop. The top five video games sold during the holiday period were Activision's ( ATVI) Guitar Hero III and Call of Duty 4: Modern Warfare, Assassin's Creed by Ubisoft, Electronic Arts' ( ERTS) Rock Band and Nintendo's Super Mario Galaxy.