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GameStop Shares Plummet on Weak Outlook

GameStop Shares Plummet on Weak Outlook
Image credit: xblafans.com

GameStop shares were down as much as 20 percent Tuesday morning as the company issued a weaker-than-expected forecast for the fourth quarter and full year due to declines in video game sales.

The world's largest video game retailer lowered its fourth-quarter earnings expectations of $1.85 to $1.95 a share from a previously set range of $1.97 to $2.14 a share. Analysts polled by Thomson Reuters were anticipating earnings of $2.14 a share.

The company also revised its full-year earnings to a range of $2.96 to $3.06 per share. Interestingly, the company had raised its full-year guidance in November to $3.08 to $3.25.

GameStop's holiday sales period was marred by a 22.5 percent decline in software sales as consumers shied away from games for former generation consoles, such as the Xbox 360 and PS3.

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While software sales were down, the release of several blockbuster consoles over the holidays -- including the Xbox One and PlayStation 4 -- resulted in a 99.8 percent increase in hardware sales during the period.

"The higher percentage of sales in the hardware category resulted in better than expected comps, but lower gross margin dollars during the holiday selling period," said GameStop's chief financial officer, Rob Lloyd. "In addition, new software sales came in below our expectations."

GameStop's total global sales for the nine-week period ended Jan. 4 were $3.15 billion -- a 9.3 percent increase over last year. Total comparable sales also increased 10.2 percent. 

The gaming giant also announced that during the holiday period, it repurchased 800,500 shares of stock at an average price of $49.39 for a total of $39.5 million. 

Related: Game On: China Lifts 14-Year Ban on Video Game Consoles

Geoff Weiss is a staff writer at Entrepreneur.com.

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