GameStop reports flat holiday sales of $2.86B

Specialty retailer lowers guidance after announcing tepid end to 2009, shares tumble 15 percent; chain pins results on weak economy, bad weather, unexpected shortages.

After the gaming industry spent most of 2009 in a sales slump, the holiday season arrived with little to cheer about. Not even the release of Call of Duty: Modern Warfare 2 and its 6 million sold could prevent November US retail sales from finishing down more than 7 percent year-over-year.

GameStop managed to post holiday sales roughly equal to those of 2008, but failed to live up to its own expectations.

Analysts are also expecting a down December, but at least one retailer managed to match last year's holiday performance. For the nine-week holiday period ending January 2, 2010, GameStop reported total sales of $2.86 billion, practically even with the 2008 holiday season's take.

GameStop attributed the stagnant sales to a combination of factors. While there were a number of hit games released, the retailer said sales were tempered by a weak economy, winter storms that kept shoppers home during December's busiest days, and unexpected shortages of some products, specifically New Super Mario Bros. Wii, the Wii itself, and the PlayStation 3.

Joining Modern Warfare 2 and New Super Mario Bros. Wii as the five best-selling holiday titles for GameStop were Assassin's Creed II, Left 4 Dead 2, and Dragon Age: Origins. Those titles were part of the reason new-game sales increased about 4 percent for the chain.

Used-game sales also grew considerably, up 10 percent from the previous year. However, those gains were offset by reduced revenue from hardware sales, as fewer systems were sold, and they sold for less thanks to console makers' recent price cuts.

Given the tepid holiday season, GameStop lowered its expectations for its full year and fourth fiscal quarter of 2009 (the three months ending January 31). The company had previously expected $1.47 to $1.65 in earnings per share for the fourth quarter, but dialed that back to $1.25 to $1.29. As for the full year, the prior expectation of $2.45 to $2.63 was lowered to $2.23 to $2.27.

Investors reacted to the news negatively, as GameStop shares traded down sharply today. As of press time, the company's stock was going for $20.26, down nearly 16 percent from yesterday's closing price of $24.03.

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