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GameStop revises post-merger fiscal forecasts

As the merger with former rival Electronics Boutique is finalised, US videogame retailer GameStop has updated its fiscal forecasts, revealing a decline in sales for the third quarter.

With the merger with former rival Electronics Boutique now finalised, US videogame retailer GameStop has updated its fiscal forecasts, revealing a decline in sales for the third quarter - but analysts remain upbeat on the firm's prospects.

The drop in sales revenue of between 12-12.5 percent for the combined company's Q3 period has been attributed to slow consumer traffic during September as a result of Hurricanes Katrina and Rita. A lack of mass-market releases (compared to the same period last year, which saw hugely popular releases such as Grand Theft Auto: San Andreas and Fable) has also said to have impacted on the figures.

The financial burden of the EB merger was another contributing factor, according to GameStop, as additional loans and financing were required to close the deal. In spite of this, revenue for the fourth quarter, which takes account of the traditional pre Christmas sales surge, is expected to rise between eight and ten percent. Full fiscal year results are expected to increase between four to six percent.

GameStop chairman and CEO, Richard Fontaine, commented: "The merger with Electronics Boutique is coming together extremely well. In a very short period of time, we have made exceptional strides bringing the two companies together. I am confident that GameStop is well on its way to fulfilling all the promises of the merger that we envisioned."

Company stock has seen a positive surge in the wake of the revised forecasts, as SunTrust Robinson Humphrey upgraded to 'buy' and set a target price of USD 40. During heavy trading, the stock price rose almost seven percent, and is currently resting at just over USD 35.

The merger has resulted in several planned closures of former EB headquarters, which will be staggered over the coming months and is expected to be finalised by the summer of 2006. However, the combined company now owns 4,200 retail outlets, making it an undeniably dominant force in the videogame retail market, both in the US and abroad.

Fontaine stated: "The timing of our combination couldn't be better. With Sony's PSP going into its first holiday gift season, Microsoft's Xbox 360 releasing in the U.S. in November and in Europe in December, GameStop is well positioned to end the year with real sales momentum. Adding to the opportunities as we move into 2006, are the expected releases of Sony's PlayStation 3 and Nintendo's Revolution. This is the absolute right time to combine the two companies and we are well on our way to realizing the benefits of the merger."

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Paul Loughrey

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