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GameStop Crashes After Surprise Fall In Holiday Video Game Sales

Jan 14 2014, 12:06pm CST | by

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GameStop Crashes After Surprise Fall In Holiday Video Game Sales
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GameStop Crashes After Surprise Fall In Holiday Video Game Sales

GameStop shares fell over 18% on Tuesday morning after the company announced “greater than expected decline” in video game sales over the holidays. Blaming it on the gaming transition to next generation consoles Xbox One from Microsoft and PlayStation 4 from Sony, GameStop reported a 22.5% sales decline in the new software category.

Investors saw the news as a warning sign for GameStop, which otherwise reported sales increases for the period. Total global sales came in at $3.15 billion, a 9.3% increase from 2012. Comparable store sales increased a healthy 10.2%, driven by a nearly 100% increase in new hardware sales — all those PS4s and Xbox Ones under the Christmas trees.

GameStop’s pre-owned category also grew 7%, based on selling heavily-discounted used versions of old consoles like the Xbox 360, PS3, and Wii. The reported gross margins on that category should come in between 46% and 49% for the year.

“I am pleased to report that the extensive planning by our entire team over the past year to prepare for the new console launches paid off,” GameStop CEO Paul Raines said in a statement. “Our outstanding execution during the holidays resulted in GameStop securing the number one market share position in the U.S. and in most of the countries in which we operate today. GameStop also had the highest software and accessory attach ratio of any retailer for both new consoles.”

This latest GameStop stock drop comes just a week after it fell 8% on news of Sony’s PlayStation Now streaming service . The company has been hurt in recent years as more gaming moves to mobile devices like tablets and smartphones, and as streaming models pick up customers who previous shopped at their local retail store.

At 12:21pm EST, GameStop shares traded at $36.85, down 18.65% on the day.

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