GameStop reports big loss on asset write-downs

Posted Thursday, Nov. 15, 2012  comments  Print Reprints

Topics: Gamestop, Wii U

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Grapevine-based GameStop reported a big loss for the third quarter after taking $679 million in write-downs, but also said it expects the holiday season to produce slightly better profits than analysts are predicting for the fourth quarter.

GameStop's shares (ticker: GME) were up more than 1 percent in early trading on the news.

The world's biggest video-game retailer said third-quarter sales were off 8.9 percent in the third quarter, to $1.77 billion, compared to a year earlier. It blamed the drop on an unusually strong 2011 third quarter that saw the introduction of "major new software titles."

Its net loss for the quarter was $624 million after the non-cash write-downs, which included $627 million in goodwill and $52 million in asset impairments. The company said the actions were based on a decline in its share price in the second quarter and on its international operations.

Not counting the write-downs, GameStop earned $47 million in the quarter, or 38 cents a share, which topped Wall Street estimates by 2 cents.

It said that despite a "tough video-game market," it expects to earn between $2.07 to $2.27 a share in the fourth quarter. The midpoint of that range, $2.17, is 1 cent above the average of estimates compiled by Bloomberg News.

Investors are weighing whether the release of Nintendo Co.'s Wii U, the video-game industry's first new home console in six years, will spur purchases or confirm declining interest in packaged games costing $60 each. The Wii U goes on sale Sunday in the U.S., replacing the previous model, an industry leader released in 2006.

The video-game industry is entering the U.S. holiday season amid an extended drop in sales. Existing consoles, which include Microsoft Corp.'s Xbox 360 and Sony Corp.'s PlayStation 3, are aging, while mobile and online options attract players. Last year, the fourth quarter accounted for 51 percent of GameStop's annual profit.

The company said on Oct. 26 it will open about 80 GameStop Kids stores featuring products including toys and collectibles for children under age 13 in time for holiday shopping.

Staff writer Jim Fuquay contributed to this report, which contains material from Bloomberg News.

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