26th August 2013 GameStop Arming itself for 'Largest Console Launch in History'.

The fortunes of GameStop (GME) have improved dramatically since the start of the year and now the retailer is preparing for a console war this festive season to further bolster its earnings.


This time last year GameStop shares hit an 8 year low, trading just below $16, and recovered to $25 by the start of 2013. Since then they have doubled to a 5 year high of $52 on the back of strong second hand game and peripheral sales and the oncoming conflict between the Sony (SNE) PlayStation 4 and the Microsoft (MSFT) Xbox One. CEO Paul Raines told investors during an earnings call for the previous quarter that he expects this to be the "largest console launch in history" when both consoles hit the American market in November.


As well as console sales GameStop can look forward to a flurry of game releases in the next quarter, predominantly Grand Theft Auto V from Take-Two (TTWO), Battlefield 4 from Electronic Arts (EA), Assassin's Creed IV by Ubisoft (UBI) and Skylanders: Swap Force from Activision (ATVI), a game which will also power the sales of Skylanders figurines.


In a time of cheap online retailers such as Amazon (AMZN) and digital download services like Steam, GameStop has continued to make itself relevant through second hand sales and its PowerUp Reward program which now has 31 million members worldwide. This is despite a 9.3% drop in software sales on the second quarter and an almost 20% drop in hardware sales as consumers wait for the new generation consoles.


Worldwide GameStop closed 52 stores in line with its policy of reducing its total number by 2% by the end of the year. The company has now upped its projected full-year earnings to $3.00-$3.20 a share from $2.90-$3.15 and expects full year sales of between -3.5% and 1.5% compared to -5% to 1.5%.


While itself maintaining a buy position on the stock, Zacks has pointed to a large bearish trend, with investors possibly believing that GameStop's meteoric rise can't continue and that the stock is only showing a temporary boost from the next gen console war.



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