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GameStop Corporation’s (GME - Analyst Report) recent dismal holiday sales performance on account of weak store traffic count that compelled it to trim its forecasts triggered a downward trend in the Zacks Consensus Estimates. A negative sentiment was palpable among the analysts covering the stock who tweaked their estimates to better align with the company’s projection.

Holiday sales for the nine-week period ended Dec 29, 2012 dropped 4.6% to $2.88 billion. Comparable-store sales fell 4.4%, reflecting a decline of 3.5% and 6.4% at its U.S. and international comps, respectively.

The disappointing holiday sales results persuaded management to become more cautious on their outlook, which now envisions comparable-store sales to decrease between 4% and 7% during the fourth quarter and in the range of 7.5% to 9% in fiscal 2012. Earlier, GameStop had projected comparable-store sales in the range of negative 7% to a positive 1% for the fourth quarter, and to decline between 6% and 9% in the fiscal year.

Grapevine, Texas-based GameStop, also restricts its fourth-quarter fiscal 2012 earnings outlook at the lower-end of the previously provided guidance range of $2.07 to $2.27 per share.

Consequently, the Zacks Consensus Estimates have been portraying a downtrend. The Zacks Consensus Estimate for the fourth quarter of fiscal 2012 dropped 3.2% to $2.09 per share, whereas for the first quarter of fiscal 2013 it fell by 4.8% to 59 cents in the last 7 days. For fiscal 2012 and 2013, the Zacks Consensus Estimates dipped by 1.6% and 0.3% to $3.14 and $3.41 per share, respectively, over the same time frame.

GameStop, which competes with Inc. (AMZN - Analyst Report), now holds a Zacks Rank #3 (Hold). The downward revision in the estimates in the past 7 days pushed the Zacks Rank down to #3 from #2.

The slump in the video gaming industry persists due to increased online gaming activities, and shifting preferences toward tablets and mobile phones from traditional game consoles. Consumers increasing accessibility to video games and PC entertainment software over the Internet could hit the sales of packaged goods and used games, and impede future growth.

Consequently, GameStop continues to branch out and has reinvented itself as a mixed retailer of physical and digital gaming and electronic products. The company’s venture in digital, iDevice and gaming tablet businesses would be accretive.

Currently, we have a long-term Neutral recommendation on the stock.

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