GameStop forecasts profit below view, shares tumble

Thu May 17, 2012 2:32pm EDT

(Reuters) - GameStop Corp (GME.N) forecast second-quarter earnings below estimates as the world's largest retailer of video game products struggled with slowing videogame hardware and software sales.

Shares tumbled nearly 10 percent at $18.82 on Thursday afternoon on the New York Stock Exchange.

For the second quarter, GameStop expects earnings of 10 cents to 18 cents per share, below analysts' estimates of 25 cents per share, according to Thomson Reuters I/B/E/S.

The company faces a "tougher sales environment" in an "unprecedented video game market," CFO Robert Lloyd told analysts.

GameStop, which competes with Britain's Game Group Plc GMG.BE, reported same-store sales slid 12.5 percent when it released preliminary earnings last week. It blamed the drop on the lack of blockbuster game launches.

U.S. sales of videogame hardware and software fell 32 percent in April after similar declines throughout the first quarter, according to market research firm NPD.

Games software sales declined 42 percent last month, NPD said.

"We will continue to operate in this market volatility till the next console cycle," Lloyd said.

Sales of traditional video game products such as consoles have been under pressure globally as gamers turn to lower-priced online offerings and spend more time on their tablet computers and phones.

GameStop has weathered the trend by focusing on selling new and used games to console owners and expanding its digital and mobile offerings.

Video game publishers are reluctant to make big investments in new offerings as they wait for the next generation of consoles.

Nintendo Co Ltd 7974.OS will follow up its Wii console with the Wii U for the holiday shopping season. This is the first new home console in years, and GameStop expects it to boost sales of games and hardware.

REPEATS PROFIT FORECAST

GameStop maintained its previously announced full-year earnings outlook of between $3.10 per share to $3.30 per share.

"We're confident they can come within the range they've provided for the full year," Sterne Agee analyst Arvind Bhatia said.

A better product slate in the fourth quarter, the launch of Nintendo Wii U and a ramp-up in the mobile sector, will boost the company's growth in the holiday season, Bhatia said.

Net income for the first quarter fell to $72.5 million, or 54 cents per share, from $80.4 million, or 56 cents per share, a year ago.

Revenue dropped 12 percent to $2.00 billion.

Analysts, on average, expected earnings of 54 cents a share on revenue of $2.05 billion.

(Reporting by Chandni Doulatramani in Bangalore and Malathi Nayak in San Francisco; editing by Sreejiraj Eluvangal and Jeffrey Benkoe)

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