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GameStop hit with low demand for games

The release of next generation gaming consoles this year has weakened the demand for video game products, said GameStop Corp, the world’s biggest retail chain for video games. The lull in game purchases by the gaming community is expected as many customers save up in anticipation of the launch of the new gaming consoles by both Sony and Microsoft.

GameStop said that other comparable store sales would also fall by 5.5 percent to 8 percent at the current quarter.

It warned that full year sales figure would most likely remain flat or fall by up to 8 percent, which means a revenue between $8.18 billion and $8.89 billion. Thompson Reuters I/B/E/S said that analysts are expecting an average of $8.86 billion on average in revenue.

Forecast by GameStop for this year’s earnings is well below the estimates of analysts. The company expects to earn $2.75-$3.15 a share, but analysts forecast $3.40 a share.

The gaming industry is expecting to recover towards the end of the year with the release of Grand Theft Auto V and the launch of the new gaming consoles, probably during the holidays.

As consumers anticipate the releases of the new products, GameStop expects the first half of the year to be challenging.

Sony confirmed last month that its new gaming console in seven years will be launched this year. Microsoft is widely expected to reveal its new Xbox gaming console as well this summer.

Sales of traditional gaming consoles has seen steady competition with the rise in popularity of online games on smartphones and tablets.

Overall sales of video game hardware and software in the United States had been dropping month after month since last year. Last February, hardware sales dropped to 25 percent according to market research company NPD. Software also fell by 27 percent on the same month.

To compensate for the downward trend, GameStop focused on selling brand new and pre-owned games to consumers with gaming consoles. It also expanded its offerings of digital copies of games for PCs and mobiles, including the ones for Android and iOS devices in some of its stores.

GameStop’s total revenue dropped marginally during the fourth quarter to $3.56 billion.

A year earlier, the company’s net income was $1.27 a share but this increased to $2.15 a share, or $261.1 million. Adjusting for the deferral of its digital goods and some other items, GameStop said that the company’s earnings were at $2.16 a share or a total of $262.3 million.

On average, analysts forecast the company’s earnings for the fourth quarter would be at $2.09 a share on revenue, translating to $3.45 billion.

source: reuters

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