UPDATE 3-GameStop Q4 profit, upbeat outlook boost shares

* GameStop Q4 EPS $1.29, vs Wall St. $1.28 estimate

* Q4 revenue rose to $3.52 billion

* Sees 2010 sales growth of 4.0-6.0 pct

* Shares rise 7 percent; video game makers also up (Adds analyst, executive comment, byline; updates stock)

By Franklin Paul

NEW YORK, March 18 (Reuters) - Retailer GameStop Corp (GME.N) on Thursday posted better-than-expected quarterly results and upbeat outlook, sending its shares higher amid optimism that a long video game industry slump may be over.

Following a disappointing 2009 in which video-game industry sales in the United States fell 8 percent, GameStop said it expects its sales to rise 4 to 6 percent this year, while earnings could improve 14 to 18 percent.

Shares of GameStop rose more than 7 percent on the outlook, which was fueled by optimism about new games including the latest versions of "God of War," developed by Sony Corp (6758.T), and Square Enix's (9684.T) "Final Fantasy."

The news appeared to also buoy shares of other video games publishers, analysts said, including Electronic Arts Inc ERTS.O, and Activision Blizzard Inc (ATVI.O), and THQ Inc (THQI.O).

"This year we are looking for growth," said Janco Partners analyst Mike Hickey. "The first two months have been negative but (the results) implies that March is starting to look up, and we are seeing the first positive comparisons in many months."

"It also suggests that the publishers, relative to their expectations, could outperform," he added.

Hickey said a larger installed base of video games users, plus expected new hardware accessories from console makers Sony, Microsoft Inc (MSFT.O) and Nintendo (7974.OS), could also drive shoppers to GameStop stores.

RESULTS BEAT EXPECTATIONS

The world's largest stand-alone retailer of video-game software, consoles and accessories, said its profit in the fourth quarter, which ended in January, was $215.9 million, or $1.29 a share, compared with $232.3 million, or $1.39, in the same period a year ago.

Revenue rose to $3.52 billion from $3.49 billion over the same period, despite a 7.9 percent decline in comparable store sales.

Analysts had expected a profit of $1.28 a share on revenue of $3.44 billion, according to Thomson Reuters I/B/E/S.

In January, the company warned of the disappointing results due to the weak economy, bad weather and product shortages. At that time, analysts had expected a fourth-quarter profit of $1.57 a share.

For its fiscal first quarter, its sees a profit of 46 cents to 48 cents a share, versus Wall Street analysts' average view of 46 cents a share. Game Stop said it expects its 2010 profit per share to increase 14 percent to 18 percent, to $2.58 to $2.68.

Analysts had expected a profit of $2.26, according to Thomson Reuters I/B/E/S.

GameStop relies on its trade-in system -- which lets shoppers return used games for a fraction of the purchase price in cash or credit toward future sales -- to help counter the drop in demand. Returned games sell at a higher profit margin -- around 50 percent -- than new games.

The company said it expects sales of new software to increase 2 percent to 5 percent in the year while used software is seen rising 5 percent to 10 percent.

"With GameStop often enjoying better new title allocations, and offering gamers trade-in credit toward new software purchases, we believe the company's new and used businesses will perform well this year," Hudson Square Research analyst Scott Tilghman said in a client note.

In an interview, Chief Executive Dan DeMatteo brushed off concerns that a recent promotion -- that offered a higher value for trade-ins -- would hurt profit margins, saying that it would not have a meaningful impact.

"We are always doing something like this, and it is really baked into our rates ... and helps build up inventory," he said. "The big difference with this promotion from others ones is that we advertised on TV, which brought more attention to it."

GameStop's shares, which have fallen about 20 percent so far this year, climbed 7.1 percent to $21.27 late Thursday afternoon on the New York Stock Exchange. (Reporting by Franklin Paul; Editing by Derek Caney, Maureen Bavdek and Richard Chang)