Wal-Mart entry into used videogames trade threatens GameStop

Tue Mar 18, 2014 11:38am EDT

Customers shop at the Wal-Mart Supercenter in the Porter Ranch section of Los Angeles November 26, 2013. REUTERS/Kevork Djansezian

Customers shop at the Wal-Mart Supercenter in the Porter Ranch section of Los Angeles November 26, 2013.

Credit: Reuters/Kevork Djansezian

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(Reuters) - Wal-Mart Stores Inc will allow U.S. shoppers to trade in used videogames for anything from groceries to gadgets, a move that could dent the profit of GameStop Corp, the largest dealer of used videogames.

GameStop shares fell as much as 6 percent in morning trading, making it one of the top percentage losers on the New York Stock Exchange.

Wal-Mart said on Tuesday its trade-in service will accept games for popular consoles like the Sony Corp's PlayStation3 and Microsoft Corp's Xbox 360, and customers can in return buy anything at Walmart and Sam's Club.

"Gaming continues to be an important business for us and we're actively taking aim at the $2 billion pre-owned videogame opportunity," Duncan Mac Naughton, chief merchandising and marketing officer for Walmart U.S., said in a statement.

The move would pit Wal-Mart against retailers such as Best Buy Co and Target Corp, besides GameStop, which also have trade-in programs for used videogames. Such games are refurbished and sold later.

While GameStop would be unlikely to lose market share, the company would be forced to go into a price war to both buy used games and to sell the refurbished games, according to Stifel analyst David Schick.

"We know that WMT "invests in price" ... and we expect GME will match an increasingly competitive marketplace to protect (market) share," Schick wrote in a note to clients.

GameStop has already warned of sagging sales of games played on older versions of Xbox and PlayStation consoles.

Sales of videogame products such as consoles have been pressured by lower-priced online offerings and as gamers spend more time on tablet computers and phones.

GameStop shares were down 5 percent at $37.82 in late morning trading on Monday, while Wal-Mart shares were up marginally at $74.87.

(Reporting by Supriya Kurane and Abhirup Roy in Bangalore; Editing by Gopakumar Warrier and Savio D'Souza)

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