Holiday sales at GameStop
Shares of the video game retailer opened 3% lower and traded as much as 6% lower after posting same-store sales growth of 3.4% during the nine-week holiday season.
That may be a positive number, but it's easy to see why investors are disappointed. Comps fell 8.6% during the 2009 holiday season, so the company didn't even claw half its way back to where it was two years ago at the individual store level.
This was also the holiday season that found Microsoft
Industry tracker NPD reported an 8% spike in industry sales through its channel checks for the month of November, so either December was ho-hum or folks just aren't shopping at GameStop the way they used to.
The NPD report gets more unsettling when you dig into the sales breakdown, with lower-margin hardware sales growing faster than the software side with its chunkier markups. This is a bit of a surprise. Call of Duty: Black Ops is obviously software, and who buys a $150 motion-based accessory without loading up on a few of the new Kinect-compatible games?
GameStop's online sales doubled during the period, but total sales growth of 5.4% -- which includes a larger base of stores -- just isn't good enough. Heck, even beleaguered Barnes & Noble
This will be a challenging year for GameStop. More retailers are offering video game trade-ins. Coinstar's
GameStop investors can always cling to the company's attractive balance sheet and cheap earnings-based valuation. That may be enough to limit the downside, but the company's sorely lacking the catalysts to get investors excited about bidding up the shares again.
Where do you see GameStop in five years? Share your thoughts in the comment box below.
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Longtime Fool contributor Rick Munarriz will admit to still playing video games, though finding time is the rub. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.