GameStop Raises Guidance On Strong January Sales

Video game software retailer GameStop Corp announced it has raised its earnings guidance for fiscal 2008, after its performance in January exceeded expectations. Recent strong performance, the company says, can be credited by "impressive" domestic and international sales. Despite industry-wide console shortages, GameStop notes that comparable sales for the fourth quarter of 2007 grew by 17 percent. Analyst Colin Sebastian of Lazard Capital Markets noted that while some hardware shortages persist -- particularly ongoing constrained Wii supplies -- he expects allocations to North America to improve in the coming months. Additionally, Sebastian believes that Xbox 360s are now in better supply after recent shortages. Sebastian raised his own fiscal 2007 sales estimates from $7.01 to $7.05 billion, and fiscal 2008 estimates to $7.7 from $7.6 billion. Wedbush Morgan's Michael Pachter raised his own estimates from $7.09 to $7.1 billion for fiscal 2007, and to $7.6 from $7.5 billion. Pachter said he assumed "GameStop will grow its overall software sales (new and used) by 18%, and that all other categories will decline by 13%, reflecting some loss of hardware market share during the year." Commented Sebastian, "We remind investors that while comp-store sales guidance may appear modest (single-digit growth), it is important to consider the cyclical shift from hardware to software sales should still translate into higher profit margins and earnings growth."