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GameStop revenue rises as demand for new consoles, mobile grows

The GameStop store sign is seen at its shop in Westminster, Colorado January 14, 2014. REUTERS/Rick Wilking
The GameStop store sign is seen at its shop in Westminster, Colorado January 14, 2014. REUTERS/Rick Wilking

By Lehar Maan

(Reuters) - Video game retailer GameStop Corp reported a 7 percent rise in quarterly revenue, driven by growth in its mobile business and demand for new games consoles made by Sony Corp and Microsoft Corp.

GameStop's shares rose as much as 5 percent in extended trading on Thursday, after the company also reported a better-than-expected first-quarter profit.

GameStop forecast second-quarter earnings of 12-20 cents per share. Analysts are expecting earnings of 17 cents per share, according to Thomson Reuters I/B/E/S.

To combat falling video game software sales, GameStop has stepped up sales of used games and hardware in recent years, as well as expanding its range of digital and mobile products to include iOS and Android devices in some stores.

The Grapevine, Texas-based company said revenue in its hardware business rose 81 percent to $438 million for the quarter ended May 3. Revenue from its mobile and consumer electronics business doubled to $102.2 million.

Sales of new game software fell 20.4 percent, hurt by fewer launches of popular video game titles.

The results reflect a wider trend. According to a report by market research firm NPD, U.S. sales of video game hardware grew 47 percent during the first quarter ended March 31, while software sales were down 27 percent in February.

Total consumer spending on video gaming in the first quarter fell 1 percent to $4.6 billion from a year earlier, NPD said in the report, published on Wednesday. (http://link.reuters.com/vyp59v)

The release of new games, however, could reverse this trend. Pre-orders for next generation consoles have been strong.

GameStop President Tony Bartel, speaking on a post-earnings conference call, said he expected a recovery in software sales to begin in the current quarter, with the release of games such as Ubisoft Entertainment SA's "Watch Dogs."

"Watch Dogs" is slated for release on May 27, to be followed later in the year by Activision Blizzard Inc's upcoming releases, including sci-fi game "Destiny" and military-action shooter "Call of Duty: Advanced Warfare.

"The industry is going to get stronger because we are seeing a lot of consoles sold," said Wedbush Securities analyst Michael Pachter. "They will buy software so we should see software sales tick up."

GameStop said its net profit rose to $68.0 million, or 59 cents per share, in its first quarter from $54.6 million, or 46 cents per share, a year earlier.

Revenue rose to $1.99 billion from $1.87 billion. Analysts on average had estimated a profit of 57 cents per share on revenue of $2.03 billion.

GameStop's shares closed at $36.88 on the New York Stock Exchange on Thursday.

(Editing by Joyjeet Das and Robin Paxton)

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