GameStop forecasts bigger-than-expected drop in same-store holiday sales

(Reuters) – GameStop forecast a bigger-than-expected drop in same-store sales for the crucial holiday quarter, and the company said it expected revenue from its business of selling videogames to largely decline during the period.

The company, the world’s largest retailer of video games, has been struggling as more players switch to downloading games on their consoles from buying physical copies.

Revenue from the videogame category, which includes new hardware, software and accessories, is expected to decline in double digits in November and by single digits in December, Chief Operating Officer Tony Bartel said in an interview on Tuesday.

Bartel said the company expected revenue from the business to be flat to positive in January.

He also said sales of Activision Blizzard’s latest “Call of Duty” game would be lower than a year earlier.

GameStop also forecast total sales to decline between 5-10 percent in the current quarter, translating into revenue of $3.17 billion-$3.35 billion.

Analysts on average were expecting revenue of $3.45 billion, according to Thomson Reuters I/B/E/S.

However, GameStop’s shares gained 2.1 percent to $24.61 in after-market trading as the company maintained its full-year profit forecast.

Bartel said the company expects to expand its operating earnings by diversifying its portfolio.

Under Chief Executive Paul Raines, GameStop has been expanding its digital and mobile offerings and snapping up technology brand stores that sell mobile phones and other electronic devices.

Revenue in its technology brand business rose 54.4 percent in the third quarter from a year earlier.

The company said it expected sales at established stores to decline between 7 percent and 12 percent in the fourth quarter, much bigger than the 7.1 percent fall analysts were expecting, according to research firm Consensus Metrix.

GameStop’s net income fell to $50.8 million, or 49 cents per share, in the third quarter ended Oct. 29 from $55.9 million, or 53 cents per share, a year earlier.

The company’s net sales fell to $1.96 billion from $2.02 billion, the third straight quarterly decline.

Excluding items, GameStop earned 49 cents per share, beating analysts’ estimate of 47 cents.

The numbers were in line with the company’s preliminary estimates released earlier this month.

(Reporting by Anya George Tharakan in Bengaluru; Editing by Sriraj Kalluvila)