GameStop quarterly revenue misses on weak video game sales

August 25, 2016 4:09 PM EDT

People enter a GameStop store during "Black Friday" sales in Carle Place, New York November 25, 2011. REUTERS/Shannon Stapleton/File Photo

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By Aishwarya Venugopal

(Reuters) - GameStop Corp (NYSE: GME), the world's largest retailer of video games, reported a lower-than-expected quarterly revenue, hurt by falling sales of new gaming software and hardware, sending its shares down 7.7 percent in after market trading.

The company said it expects to earn 53-58 cents per share in the third quarter. Analysts on average were expecting a profit of 53 cents, according to Thomson Reuters I/B/E/S.

Sales in the company's gaming business have been on a downward spiral as video game publishers nudge consumers to buy games on their consoles directly instead of stores.

Sales from the new video game hardware business fell about 33 percent to $216.4 million for the second quarter ended July 30.

Video game sales were impacted by a lack of new titles to offset popular game launches in the year-ago quarter, such as "Batman: Arkham Knight" and "Elder Scrolls Online", the company said on Thursday.

GameStop's quarterly net sales fell 7.4 percent to $1.63 billion, missing the analysts' average estimate of $1.72 billion.

"The cyclical nature of the business simply takes you up and down on the title count. That's one of the main reasons why we have diversified the business," Chief Executive Paul Raines told Reuters in an interview.

GameStop has been expanding its technology brands businesses, which sells cellphones and consumer electronics, to counter falling sales in its physical gaming business.

Revenue in the technology brands business, which includes stores such as Spring Mobile, Cricket Wireless and Simply Mac, jumped 54.6 percent to $175.9 million in the quarter.

Net income rose to $27.9 million, or 27 cents per share, in the quarter, from $25.3 million, or 24 cents per share, a year earlier.

Excluding items, the company earned 27 cents per share, in line with analysts' estimates.

GameStop shares have fallen about 25 percent in the last 12 months.

(Reporting by Aishwarya Venugopal in Bengaluru; Additional reporting by Sruthi Shankar; Editing by Shounak Dasgupta)

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