UPDATE 2-GameStop says 2013 outlook improved after Xbox One news

Thu May 23, 2013 1:46pm EDT

* Beats estimates, raises low-end of full 2013 forecast

* Mobile sales quadruple off a low base

* Forecast now takes Xbox One into account

By Chandni Doulatramani and Malathi Nayak

May 23 (Reuters) - GameStop Corp raised the lower end of its full-year earnings forecast on Thursday after beating fourth-quarter estimates, counting on a boost from new gaming consoles due later this year and further growth in digital and mobile sales.

The videogame industry, which has struggled with declining sales as gamers migrate to mobile and social media platforms, is hoping for a strong finish to 2013 with the release of new titles like Take-Two Interactive Software's "Grand Theft Auto V" and Electronic Arts Inc's "Battlefield 4."

New gaming consoles like Microsoft's Xbox One and Sony Corp's Playstation4 are expected to launch in coming months. Investors hope the advent of new gaming hardware will give the video game industry a shot in the arm.

GameStop raised the lower end of its full-year earnings forecast to $2.90 to $3.15 per share, from $2.75 to $3.15 per share previously.

"The expectations are that we're going to have a tough first half until we see titles like Grand Theft Auto and new consoles," Chief Financial Officer Robert Lloyd told Reuters.

Sony Corp said in February it would release its next-generation PlayStation this year, its first videogame console in seven years. And on Tuesday, Microsoft unveiled the Xbox One, its first new gaming console in eight years, making its strongest push so far to dominate consumers' living rooms with an array of exclusive media and video game content.

GameStop shares, which have risen about 46 percent in the last three months, were trading flat at $36.20 in the afternoon.

Analysts say there remained confusion over whether Microsoft planned to take a cut on revenue for used games played on the Xbox One, following news reports that suggested the software company may charge used-game users a fee.

"It appears that Microsoft will assign a unique ID to each game disk loaded onto the Xbox, which could require a second user to pay Microsoft a fee to access Xbox services," R. w. Baird analyst Colin Sebastian said in a note on Tuesday.

GameStop executives said they would wait for the software company to communicate that.

"The majority of how the stock is going to trade is going to be the market interpretation of how "Xbox One" is going to handle used-game sales," National Alliance Securities analyst Mike Hickey told Reuters.

Total U.S. sales of videogame hardware and software in April saw a 25 percent drop, following a downward trend that has continued month over month since last year, according to a report by market research firm NPD.

Quarterly profit of the world's largest video games retailer fell to 46 cents per share, but beat analysts' estimates of 40 cents per share.

The company, which said its year-to-date market share of PS3 and Xbox 360 software in the United States was 47.7 percent, reported first-quarter revenue of $1.87 billion. Mobile sales rose 290 percent to $46.8 million.

Analysts on average were expecting sales of $1.82 billion, according to Thomson Reuters I/B/E/S.

Quarterly profit fell to 46 cents per share, but beat analysts' estimates of 40 cents per share.

For the second quarter, GameStop expects earnings of 1 cent per share to 7 cents per share. Analysts are expecting a profit of 8 cents per share.

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Comments (1)
wjd wrote:
“The videogame industry, which has struggled with declining sales as gamers migrate to mobile and social media platforms”

I do not believe this is true. The decline of sales for console games relates to lack of quality games over the past 12 months or so and the coming of the next-gen consoles from MS and Sony. It is also convenient/cost effective to buy used games of lower quality titles. $60 a pop is a bit rough.

Mobile and social media games are casual game experiences. You do these on the go or when on downtime (mobile) or at a PC (social media games). Free to $4.99 price tag is also very economical for any wallet.

Once the next-gen consoles come out and we start to see solid quality games return, then we will see a rise in bottom lines.

However, I would like to see a change in how used games are traded/sold if MS or Sony decide to check if you own a game and tie it to your profile. If they do this, then piracy should almost be nil. If true, then this should also reduce the high cost of console games, or at least, we should demand it. Say from $60 down to $40. Otherwise, leave the used game business alone.

May 23, 2013 3:02pm EDT  --  Report as abuse
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