GameStop's profit forecast misses St as older game sales lag
(Reuters) - GameStop Corp, the world's largest videogame retailer, warned of lower-than-expected profit as sales sagged for games played on older versions of Xbox and PlayStation consoles.
The company's shares fell as much as 20 percent in early trading, wiping out almost $1 billion in market value.
Microsoft Corp launched the latest version of its Xbox in November, selling three million consoles by the end of December. Sony Corp has sold 4.2 million PlayStation 4 consoles as of December 2 after launching it in November.
GameStop said on Tuesday that sales fell 22.5 percent in its new software business as a greater-than-expected decline in sales of older versions of the games offset strong demand for software for the new consoles.
Morningstar analyst Liang Feng said too much of a drop in sales of old console software could hurt GameStop as it is historically the company's strongest business.
The retailer said it expects fourth-quarter gross margins for pre-owned category of 46 percent to 49 percent.
GameStop's shares fell 8 percent on January 7 on fears that Sony's planned service to stream older-generation games would jeopardize the retailer's large and growing used-game business.
GameStop's business has also been hurt by lower-priced online offerings as gamers spend more time on tablet computers and smartphones.
The company said it expects earnings to be between $1.85 and $1.95 per share for the fourth quarter.
Analysts on average were expecting a profit of $2.14 per share, according to Thomson Reuters I/B/E/S.
The company's shares were down nearly 19 percent at $36.87. Nearly 1.5 million shares changed hands by 1130 ET, more than two times the stock's 10-day moving average.
(Reporting By Lehar Maan & Neha Alawadhi in Bangalore; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila)