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GameStop says demand hit as customers await new consoles

A GameStop store is pictured in Pasadena, California March 27, 2013. REUTERS/Mario Anzuoni
A GameStop store is pictured in Pasadena, California March 27, 2013. REUTERS/Mario Anzuoni

By Neha Alawadhi and Malathi Nayak

(Reuters) - Retailer GameStop Corp warned of weak sales this year as customers delay purchases ahead of the arrival of next-generation videogame consoles, but it reported stronger-than-expected quarterly results.

The world's largest retailer of videogame products said on Thursday that it expected full-year sales to remain flat or fall by as much as 8 percent, implying revenue of between $8.18 billion and $8.89 billion. Analysts on average expect $8.86 billion, according to Thomson Reuters I/B/E/S.

GameStop's full-year earnings forecast lagged analysts' estimates by a sizable margin. It expects a profit of $2.75 to $3.15 per share, while analysts had estimated $3.40.

The company said same-store sales were likely to fall 5.5 percent to 8 percent this quarter.

"The first half of the year is going to be very challenging because we're continuing the trend that we have seen in the last two or three months on sales of hardware from the current console set and sales of software," Chief Financial Officer Robert Lloyd said in an interview.

The videogame industry is anticipating a strong finish to 2013 with the release of Take-Two Interactive Software's "Grand Theft Auto V," Electronic Arts Inc's "Battlefield 4" and at least one next-generation console by the holidays.

As a result, consumers are postponing purchases until the fourth-quarter console introductions.

"But we expect to return to growth in the back half of the year," Lloyd said.

Sony Corp said last month it would release its next-generation PlayStation this year, its first videogame console in seven years. Microsoft Corp is also expected to announce the successor to its Xbox 360 later this summer.

Global sales of traditional videogame products such as consoles have suffered because of the rising popularity of online games as enthusiasts spend more time on tablets and phones.

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

Games software sales were down 27 percent in February, the report said.

GameStop has weathered the trend by focusing on selling new and used games to console owners and expanding its digital and mobile offerings, including the sale of iOS and Android devices in some stores.

The company said revenue fell marginally to $3.56 billion in the fourth quarter ended on February 2. Analysts on average expected $3.45 billion.

Net income attributable to GameStop rose to $261.1 million, or $2.15 per share, from $174.7 million, or $1.27 per share, a year earlier.

Excluding items such as the deferral of digital revenue, earnings were $2.16 per share. Analysts had forecast $2.09.

In January, GameStop cut its same-store sales forecast for the fourth quarter after customer traffic shrank over the holiday season.

The company's shares were up 0.5 percent at $26.58 in late-morning New York Stock Exchange trading.

(Reporting by Neha Alawadhi in Bangalore and Malathi Nayak in San Francisco; Editing by Sreejiraj Eluvangal and Lisa Von Ahn)

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