GameStop sees Q3 quagmire

Adjusts same-store sales down for current quarter, though FY will see a net up; analysts roll with the news, maintain rosy outlook.

GameStop's long and winding road to specialty-store dominance is not without its curves and rough spots--evident today by a statement the company released before the markets opened in New York.

In it, the retailer restated expectations for the current quarter, which ends October 31, 2005. The new forecast sees same-store sales dipping by between 12 to 12.5 percent. Officials said sales across the company's almost 2,000 stores were impacted by Hurricane Katrina, as well as by difficult comparisons with the prior year when Grand Theft Auto: San Andreas and Fable were released to enthusiastic consumers.

The hard times for GameStop aren't expected to last for long, however. For the full fiscal year ending January 28, 2006, company officials are predicting same-store sales to deliver an impressive jump of between 8 and 10 percent in sales.

Analysts reacted calmly to the news. Piper Jaffray's Tony Gikas noted "industry headwinds" that could "challenge GME shares during the next three months." He also referred back to the strong gains GameStop experienced last October and November when same-store sales jumped 35 and 11 percent, respectively.

But longer term, he sees a "solid Xbox 360 hardware launch" and "an attractive new software title slate" as fortifying the company's fourth and full-year financials.

Gikas rates the company a Buy and sees the stock hitting $40 in the next 12 months. At press time, GameStop was trading at $35.66, up a buck from yesterday's close on the NYSE.

Commenting on both the recently completed merger with Electronics Boutique and the overall sales season, GameStop CEO R. Richard Fontaine said, "The timing of our combination couldn't be better ... with Sony's PSP going into its first holiday gift season, Microsoft's Xbox 360 releasing in the US on November 22, 2005, and in Europe on December 2, 2005, GameStop is well positioned to end the year with real sales momentum."

Wedbush Morgan analyst Michael Pachter also alerted his constituents to his favorable long-term outlook for the company, similarly maintaining his Buy rating and also seeing GME shares reaching the $40 threshold within the next 12 months.

Written By

Want the latest news about Fable?