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GameStop Beats Estimates

The company guides first-quarter earnings higher.

Updated from 10:36 a.m. EDT

Video-game retailer


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beat analysts' fourth-quarter expectations and guided the Street higher for its current quarter and new fiscal year.

Net income for the fourth quarter rose to $129.8 million, or 81 cents a share, from $85 million, or 55 cents a share, a year earlier. Analysts polled by Thomson Financial were expecting earnings of 80 cents a share.

Sales increased 38.2% to $2.3 billion from $1.67 billion a year ago. That compares to Street expectations of $2.12 billion.

On a comparable-store basis, sales increased 26.5% during the fourth quarter.

Shares of GameStop recently soared $3.18, or 11.4%, to $31.15 in Tuesday trading.

Brisk sales of


World of Warcraft: Burning Crusade

game helped drive revenue, the company said. The best-selling PC game in GameStop's history sold more than 650,000 units in the U.S. and 200,000 units internationally since its launch in January.

Used video games grew 25% during the quarter, said GameStop.

The company's top 25 bestselling software titles came from eight different platforms, including current- and previous-generation consoles, and the PC.

"This is shaping up not to be a replay of previous cycle. It is almost as if it is a cycle on steroids," said Richard Fontaine, chairman and CEO of GameStop.

"Not only will the cycle be technologically more multifaceted, but much broader from a demographic perspective. In short, it will be wider, deeper and longer," he said.

For its current first quarter, the company expects comparable-store sales to range from an increase of 12% to 14%, driven by the expected launches of



PlayStation 3 in Europe and Australia, and continued demand for


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Xbox 360 titles.

Earnings for the first quarter are expected to range from 15 cents a share to 16 cents a share, above analysts' expectations of 13 cents a share.

For fiscal 2007, GameStop said sales are likely to grow between 19% and 21%, with comparable-store sales growth of 14% to 16%, backed by a strong release slate of video game titles including the much-awaited

Halo 3


Grand Theft Auto IV


The company forecast earnings for the year to range from $1.37 to $1.40. That exceeds analysts' expectations of $1.34 a share.

Grapevine, Texas-based GameStop said it will open 500 to 550 stores worldwide in 2007. Approximately 325 of those will be in the U.S. and 200 will be in the rest of the world. That compares with 421 stores that GameStop opened worldwide last year. The company said it slowed down new store expansion in the U.S. to help better integrate existing EB Games stores, said Fontaine.

Among the latest consoles, Xbox 360 has the largest installed base and U.S. sales growth is likely to be another 4 to 5 million hardware units this year, said GameStop. Software for the console could grow 50% to 60% led by titles like

Halo 3


Grand Theft Auto IV



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Guitar Hero


Spider-Man 3



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