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GameStop shares plunge 15% on weak sales

By Phil Elliott

Fri 08 Jan 2010 9:38am GMT / 4:38am EST / 1:38am PST

Investors show their disappointment as US specialist retailer slashes Q4 guidance

Shares in US specialist retailer GameStop have fallen by almost 15 per cent following its revelation earlier this week of poor Holiday sales.

The company reported revenues down by 8.6 per cent for the nine-week period ending January 2 at USD 2.86 billion, significantly lower than most analysts had predicted.

As a result trading in GameStop stock opened yesterday sharply down, before rallying slightly to end the day at USD 20.46, a fall of 14.9 per cent.

The company also slashed its Q4 forecast to an estimate of a 8.5-9.5 per cent decline, compared to previous guidance of a 4-7 per cent decline.

However, Wedbush Morgan analyst Michael Pachter believes that the firm can regain some of its market share throughout this year, ahead of another tough challenge next Holiday.

"We believe that industry sales will rebound in 2010 and that GameStop is well positioned to gain share the first half of the year," he wrote in a note to investors. "The company has high exposure to the hardcore software releases, which we expect to drive market growth in 2010, and comparatively low exposure to hardware, which we expect to decline.

"The company's appeal to hardcore gamers will become increasingly important as Wii sales stagnate and Q1's long-awaited slate of games comes to market."

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