2012 'challenging' for console gaming, says GameStop

Retailer says past year was tough due to longevity of current console cycle; fourth-quarter, full-year sales down.

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GameStop today reported its fourth-quarter and full-year 2012 financial results, calling the year tough, but noting the launch of new consoles and further investment in digital sectors should help turn things around at the retailer.

"While 2012 was a challenging year for console gaming, we focused on factors within our control," GameStop CEO Paul Raines said in a statement. "We expanded our market leadership position, maintained our financial strength, and controlled our spending. Perhaps most importantly, we invested in our mobile and digital businesses to position the company for future success. These channels delivered as planned and significantly contributed to our highest ever gross margin and profitability."

For the fourth quarter ended February 2, GameStop total sales hit $3.56 billion, down from $3.58 billion during the same period last year. Comparable store sales fell 4.6 percent. Meanwhile, GameStop's digital sales jumped 60.3 percent and mobile sales turned in $100 million, helping offset the weakness in the core business.

Adjusted net earnings for the period rose 9.5 percent to $262.3 million, though GameStop said this was primarily due to the positive impact of the 53rd week in 2012. If impairment charges are factored in, net earnings were $261.1 million, up from $174.7 million last year.

For GameStop's fiscal 2012 ended February 2, the retailer reported total global sales of $8.89 billion, down 7 percent from $9.55 billion last year. Comparable store sales fell 8 percent. New and preowned sales fell year-over-year due to the "longevity" of the current console generation, GameStop said.

Adjusted net earnings for the year hit $403 million, compared to adjusted net earnings of $405.1 million this time last year. When restructuring, impairment, and debt retirement expenses are factored in, GameStop actually recorded a net loss of $269.7 million for the year.

Looking ahead, GameStop said it believes the arrival of new consoles from Microsoft and Sony, as well as Grand Theft Auto V, will provide a jolt to the company's bottom line.

"As we look towards the start of the new console cycle, our industry market model indicates a return to growth with the launch of new game systems," Raines said. "GameStop is strong, healthy and ready to lead the industry and its customers into the next phase of gaming."

Though GameStop is optimistic about the outlook for the second half of the year, the first half will be a challenge, the company said.

"Ahead of these events, GameStop expects the first half of the year to be challenging as consumers postpone purchases leading up to the fourth quarter console launch."

In a post-earnings financial call, GameStop revealed that 97 percent of its stores are profitable. In addition, the company said its PlayStation 4 "First-to-Know" list has risen to 900,000, up from 600,000 earlier this month.

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