Expectations down as GameStop, Take Two report results tomorrow

Top US retailer GameStop and leading publisher Take Two Interactive are both set to announce financial results tomorrow, with analysts expecting both firms to release disappointing figures after a tough final quarter for the industry.

GameStop, which merged with Electronics Boutique last year to become the largest retailer of videogames in the world, will release results for the nine-week holiday season and update its revenue guidance for the quarter.

It's widely expected that the firm's nine-week revenues will be down from last year's figure, owing to weak software sales and lower than expected sales of Xbox 360, which was shipped in smaller volumes than most commentators expected.

However, analysts differ over the scale of the damage - with Banc of America Securities' Gary Cooper anticipating a same store sales drop of 8 to 10 per cent, while Wedbush Morgan's Michael Pachter is more optimistic, expecting the firm to have come in above industry average with same store drops of just 4 per cent.

Take Two, meanwhile, will tomorrow announce its results for the fourth fiscal quarter - which ended on October 31st, and is expected to use the opportunity to drop its projections for the first fiscal quarter of 2006, which ends on January 31st, and for FY06.

Wedbush Morgan's Pachter believes that the firm met its projections for Q4, albeit coming in at the low end of its guidance - which called for earnings per share of $0.27 to $0.30 on revenues of $286 to $291 million.

At present, Take Two is projecting revenue of $300 to $350 million in Q1, but weak NPD figures from November and lower than expected sales of the PlayStation Portable - which will translate into weaker sales of Take Two's Grand Theft Auto: Liberty City Stories - are likely to negatively impact those figures.

Both Pachter and Cooper are anticipating a drop in the Q1 guidance, with Pachter dropping his own estimates for the quarter to $285 million in revenues. Both analysts also expect the company to drop its overall guidance for FY06.

The results from GameStop and Take Two will be an early indicator of just how badly the weak retail environment in the holiday season has hit publishers, and the markets will no doubt be watching both announcements keenly.

Later this month, three other major publishers will announce their figures for the holiday season - with Activision, Electronic Arts and THQ all set to announce earnings and revised FY06 guidance in the week of the 23rd of January.