Wal-Mart announced Tuesday that the program would begin on Wednesday, March 26. The retail giant said customers can trade in old video games in exchange for gift cards applicable towards any Walmart or Sam's Club purchase, both in stores or online. The program will be available at more than 3,100 Walmart stores in the U.S. and will accept games from the Sony PlayStation 3 and Microsoft (MSFT) XBox 360.
The move could prove extremely problematic for GameStop, which uses a trade-in program as a key part of its business strategy in its nearly 6,500 stores. The company reported in its third-quarter results in January that pre-owned sales increased 7% to $567 million during the 2013 holiday season, which accounted for 18% of all holiday sales. GameStop also expects gross margins for the pre-owned category in the range of 46% to 49% for both the fourth quarter and full fiscal year.
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TheStreet Ratings team rates GAMESTOP CORP as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate GAMESTOP CORP (GME) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins."