GameStop Corporation (GME), the world’s largest video game and entertainment software retailer, recently announced that its Board of Directors has approved a $300 million share repurchase program, as a part of its capital allocation strategy for fiscal year 2010. The buyback would be accretive to earnings by 10%. 

Grapevine, Texas based company plans to spend $200 million for opening 400 stores and other capital expenditures, and would also reserve $100 million for buyouts. GameStop notified that it expects to end fiscal year 2010 with $700 million in cash. 

The largest reseller of used video games as well as PC entertainment software, GameStop, opined that over the last three years, it has paid off long-term debt of $500 million; acquired Micromania, France’s leading video game retailer for $580 million, and has generated ample funds to support the opening of almost 2,000 new stores. 

GameStop’s shares rose $0.47 or 2.3% to $20.79 in the after-market trading hours. 

However, last week GameStop cut its fourth-quarter 2009 guidance, given the sluggish holiday sales season. Despite being the global leader in the retailing of software, hardware, and game accessories for video game systems and personal computers, competition from other retail heavyweights such as, Wal-Mart Stores Inc. (WMT) continues to hurt the company’s sales. 

Comparable-store sales for the nine-week holiday period ending Jan 2, 2010, slid 8.6%, whereas total sales for the period remained flat at $2.86 billion compared to the same period last year. New video game software sales climbed 4%, whereas hardware sales dropped 8%. Even the sales of used video game products were lower than expected. 

GameStop now expects fourth quarter earnings in the range of $1.25 to $1.29 per share, down from $1.47 to $1.65, forecasted earlier. For fiscal year 2009, the company expects earnings between $2.23 and $2.27, well below the previous expectation of $2.45 to $2.63. 

Comparable-store sales in fourth-quarter 2009 are expected to decline in the range of 8.5% to 9.5%, whereas for fiscal year 2009, it is expected to fall between 8% and 9% with total sales expected to rise in the range of 2% to 3%. 

GameStop currently operates 6,457 retail stores in 17 countries worldwide.
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