Weak video game market hits GameStop in Q1

GRAPEVINE, Texas — Decreased demand for new video game hardware and software contributed to GameStop's 12.2% sales decline in global sales during the first quarter of 2012. Total global sales for the first quarter of 2012 were $2 billion compared with $2.28 billion in the prior year quarter, a decrease of 12.2%. As announced last week, consolidated comparable-store sales decreased 12.5% compared to the prior year quarter.

Paul Raines, CEO, stated, “GameStop continues to outperform the market in new game sales through the late stages of this console cycle. Despite slower store traffic during the quarter, we achieved our earnings target due primarily to gross margin expansion and positive profit contributions from our pre-owned, mobile and digital businesses. We expect those segments to fill the profitability gap as we transition to the new console cycle.”

During the quarter, sales in the pre-owned and ther categories were down slightly, while sales in new hardware and software declined more than expected. Digital receipts, which are included in the other category, increased 23% over the first quarter of 2011. Mobile sales, also included in the other category, were $12 million, on plan to reach the company’s goal for mobile sales of $150 to $200 million in 2012.

GameStop’s net earnings for the first quarter were $72.5 million compared to net earnings of $80.4 million in the prior year quarter. As announced last week, diluted earnings per share were 54 cents, compared to diluted earnings per share of 56 cents in the prior year quarter.

For the second quarter of fiscal 2012, GameStop expects comparable-store sales to range from down 11% to down 5%. Diluted earnings per share are expected to range from 10 centsto 18 cents.

The company maintains its previously announced full year diluted earnings per share guidance range of $3.10 to $3.30. Full year comparable store sales are expected to range from down 5% to flat.