GameStop stock drop blamed on Walmart’s discounted game prices

The Dallas Morning News reports that GameStop’s stock dropped substantially Wednesday (December 2, 2009) after Walmart announced decent discounts on some bestselling games and $50 gift cards for Nintendo Wii buyers.

GameStop stock dropped 8.3 percent after to close at $21.87 after Walmart revealed discounts on games including Madden 2010 and Left 4 Dead 2, knocking their price down to $50. The DMN quotes Arvind Bhatia an analyst at Dallas’ Sterne Agee & Leach, saying GameStop is probably not worried.

“This isn’t as negative for GameStop as it sounds.The part of the business that’s under attack – new games – represents one-third of GameStop’s profits.”

Bhatia reminds us that the lion’s share of GameStop’s profits, 45 percent, come from its used game sales. The company takes used video games in trade to fuel those sales. Gamestop’s “$55 used game” is a popular point of reference among the store’s critics. Others including Best Buy and online rental service GameFly are beginning their own trade-in programs, but they’re rookies in a field GameStop has proven it can profit from.

If anything, this development could make more sense of GameStop director Leonard Riggio’s unloading $60 million worth of stock in October. There are likely to be a few interesting stock fluctuations as Wal-Mart tries to flex its game-selling muscle.

Read [Dallas Morning News] Also Read [Gamertell]