DOW JONES NEWSWIRES 
 

GameStop Corp.'s (GME) fiscal first-quarter earnings rose 13% on higher sales and margins, but the video-game retailer forecast current-quarter profit below analysts' expectations.

The company forecast second-quarter earnings per share of 28 cents to 33 cents on a same-store sales decline of 8% to 11% due to slowing hardware sales and last year's stimulus checks goosing results. Analysts surveyed by Thomson Reuters expected 40 cents.

GameStop's shares were down 11% at $23.51 in premarket trading. The stock through Wednesday was up 22% this year.

Shareholders have worried the slumping economy will pinch sales of video games and consoles, especially as competition from other retailers like Best Buy Co. (BBY) and Wal-Mart Stores Inc. (WMT) is rising.

GameStop had a virtual monopoly in the used-games market, but is now facing competition from Amazon.com Inc. (AMZN), which launched a service allowing customers to trade in games for store credit, taking aim at a key part of GameStop's business and a big reason for the company's strong performance amid the recession.

For the period ended May 2, the company posted income of $70.4 million, or 42 cents a share, up from $62.1 million, or 37 cents a share, a year earlier. The latest results included 1 cent in costs from retiring $50 million in debt. In March, the company forecast 40 cents to 42 cents, slightly above analysts' then-estimates.

Revenue increased 9.2% to $1.98 billion as same-store sales fell 1.5% amid the recession in Europe and a slowdown of console sales late in the quarter. Analysts polled by Thomson Reuters most recently expected $2 billion.

"During the quarter GameStop sustained its strong earnings growth momentum and exceeded earnings guidance despite less-than-planned comparable store sales," said Chief Executive Daniel DeMatteo. He added the company expects the second half of this fiscal year to be stronger than the first half was because of a "wide-ranging" lineup of new titles.

Gross margin rose to 27.4% from 26.1%. New-game software sales slid 2.8% while new hardware sales rose 17%. Sales of used games jumped 32%.

GameStop opened 114 new stores during the quarter. It had said in February it plans to open more than 400 stores this year.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; kerry.grace@dowjones.com