GameStop Reports Record Holiday Sales Driven By GHIII, CoD 4

Entertainment software retailer GameStop has released record results for its nine-week holiday period, reporting $2.33 million in sales, a 34.7 percent increase over the same holiday period in 2006, driven by top-sellers Guitar Hero III and Call of Duty 4: Modern Warfare. GameStop says the top five video games it sold during the holiday period were Activision’s Guitar Hero III and Call of Duty 4: Modern Warfare, Ubisoft's Assassin's Creed, EA's Rock Band and Nintendo's Super Mario Galaxy. GameStop chairman and CEO R. Richard Fontaine said that DS and PSP sell-outs reached record levels as well, in addition to "very strong" console sales, though the retailer did not specify how many units it moved. Commented Fontaine, “Driven by robust domestic and international sales, GameStop achieved the most successful holiday season results ever. Video game software sales grew by 45 percent, while the next generation installed base is now triple last year’s base and a very positive leading indicator for future sales growth.” He continued, “Video gaming is redefining itself and attracting more players than ever as demonstrated by the growing number of Wii parties and Guitar Hero fests held not only at home, but also on college campuses, cruise ships and any place people are having fun.” [UPDATE: Following GameStop's initial announcement, Wedbush Morgan analyst Michael Pachter said the analyst group was lowering their GameStop rating to HOLD from BUY, and their price target to $57 from $69. Explained Pachter, "GameStop had great holiday sales, but we are increasingly concerned about its valuation, as we believe that investors are no longer willing to pay premium multiples for growth." "We believe that this news is a positive signal that most major video game publishers also had strong holiday sales," he noted, elaborating that he believes GameStop saw holiday sales in excess of its guidance range largely due to industry performance during that period. He concluded, "These guys are doing EVERYTHING right. The downgrade has nothing to do with execution, which has been and continues to be brilliant; rather, we based our downgrade on our honest belief that the market is unprepared to pay premium multiples for retailers, even if those retailers demonstrate phenomenal earnings growth. I have the utmost respect for the job that GameStop management has done, and they have consistently exceeded expectations. I continue to believe that they will exceed our expectations in the future."]