GameStop Warning, Delivers Coal in the Holiday Stockings

It gets worse. The company further said that its total comparable-store sales were down by 4.4%. Of that 4.4%, the U.S. region was down by some 3.5%, and international was down by an even wider 6.4% in the holiday period.

GameStop is narrowing its comparable-store sales range for the fourth quarter to -7.0% to -4.0% and the full year to -9.0% to -7.5%.

The company tried to talk up the Wii U launch, as well as a strong digital growth and continued momentum in the mobile space. Unfortunately, the drag is the same thing that has concerned investors for so long: a decline in store traffic. GameStop is one of those companies that has to get people into the stores. It is no secret that video game trends have been moving away from in-store purchases.

Here is the breakdown of its results for the holiday period:

• New hardware sales decreased 2.7%, including the sale of 320,000 Nintendo Wii U units worldwide.
• Sales of new video game software decreased 5.1% as frontline title releases could not offset a decline in overall store traffic.
• The preowned category declined 15.6% as limited inventory due to fewer new titles released throughout 2012 and less promotional activity negatively impacted sales compared to last year.
• Digital receipts increased more than 40.0%, while sales in the mobile business were $76.5 million during the holiday period and have exceeded $160 million year-to-date.
• Global e-commerce sales improved 20.5% compared to the 2011 holiday period.

GameStop expects that its fourth-quarter 2012 earnings will be at the low end of its current guidance range. Thomson Reuters was calling for $3.56 billion in sales for the quarter, and we would note that this holiday season is referred to as a “nine-week period” rather than a quarter. Either way, this is going to hurt.

The company went on to say that it repurchased 458,000 shares of its common stock at an average price of $25.51, or $11.7 million worth of stock. That is just not a very aggressive buyback move so far. As of the end of the holiday period, the company has approximately $488.3 million remaining of its current share repurchase authorization.

GameStop shares are down 8.5% at $22.63 in premarket trading.