GameStop stock rocked on weak outlook

World's largest game retailer reports record Q1 earnings of $1.98 billion, but lowered full-year guidance sends shares southward.

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In the business world, the creed "what have you done for me lately" is more accurately put as "what are you going to do for me tomorrow." Today, GameStop is feeling those words, as while the world's largest specialty game retailer posted record first-quarter earnings, a downwardly revised second-quarter and full-year forecast has sent its stock plunging nearly $4, or 15 percent, to $22.53 per share as of press time.

GameStop is still bringing in bank.
GameStop is still bringing in bank.

Reporting today on its fiscal quarter ended May 2, GameStop said revenues rose 9.2 percent to $1.98 billion, up from the $1.81 billion the retailer brought in a year ago. Profits saw a similar hike during the three-month period, climbing 13.4 percent from $62.1 million to $70.4 million.

On the back of that strong performance, however, GameStop said that its second-quarter earnings would come in below previous expectations. Comparable store sales are now expected to fall 8 to 11 percent during the period, compared to growing 20 percent a year ago. Earnings-per-share guidance was also lowered to between $0.28 and $0.33 from $0.34 a year ago. GameStop also expects full-year comparable store sales to be flat, backing off previous expectations of 4 to 6 percent growth.

"In the second quarter, like the first, we face very strong comparisons to the prior year period due to the unprecedented number of blockbuster titles released in the first half of 2008 and a significantly more brittle global economy," GameStop CEO DeMatteo said in a statement, echoing comments made by NPD analyst Anita Frazier last week.

As for those tough comparisons, GameStop said that its top sellers during the period were the Nintendo DSi on the hardware front--which moved 435,000 units in the US during its first week--and Capcom's Resident Evil 5 and Street Fighter IV for software. However, GameStop noted that those releases were unable to hold a candle to 2008's top performers, Take-Two's Grand Theft Auto IV and Nintendo's Super Smash Bros. Brawl.

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