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Best Buy revenues dip slightly as games underperform

But US retailer confident that move to pre-owned will see resurgence

US retail monolith Best Buy has reported a 1.1 per cent dip in revenues, highlighting its games and hardware division as having performed below expectations in the last year.

The company saw a drop of almost 14 per cent in its domestic game sales, with international software revenues down 15 per cent for the quarter ending November 27, 2010.

The dip was blamed on slowing hardware sales for Wii and PS3, which had previously been running at an all time high. The disclosures took place in an investor call discussing the company's third-quarter earnings.

"The gaming sector lagged our expectations," CEO Brian Dunn told investors in the call. "We did not perform as well on some of the new game titles as we had expected, especially coming off a 20-month high in market share a year ago driven by Wii and PS3 hardware and title sales.

"We believe we are well positioned to grow this product segment because of our relationship with so many gaming enthusiasts. In the short term, we feel very good about the launch of the new gaming peripherals, Kinect and Move. We estimate that we have a number one market share in Kinect and Move, which already have had a positive impact in November.

Both Dunn and his executive vice president Mike Vitelli saw the pre-owned market as being the area which could turn around the sector's performance. The company began a game trade-in and pre-owned service earlier this year.

"We also continue to be excited our opportunities in used gaming, which is a lucrative market that we have just recently entered," said Dunn. "In general, the combination of technology innovations and improvements in our own value proposition leaves us optimistic that we're positioned to grow our share in the gaming business."

Later in the call, Vitelli responded to a question about the reasons behind the dip in performance.

"We've just started what we're doing with trade-in and used games. We're very pleased with the reaction that we're getting in the about 800 stores that it's in. And the stores where we actually have trade-in counters inside the gaming department, which is a few hundred, the exchange rate is much, much higher than the stores that don't have it, so that's something we're going to continue to expand. So we're pleased with that and getting us into that part of the business that we virtually have zero in today.

"As far as gaming in the third quarter, our hardware was good; our software was softer than we would have liked, and that's basically because of the titles that were launched in that time. Last year at this time we were into a lot of Wii business and that kind of family category where we did strong in.

"We were lapping that against titles that were much more core gamer, which is the share and the business that we're trying to go after with the trade-in and used. So that's what happened in it, but we're optimistic and very aggressive in what we're doing in that space going forward."

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