Wal-Mart to let US shoppers trade in used videogames
19 March 2014
Wal-Mart Stores Inc would let US shoppers to trade in used videogames for anything from groceries to gadgets, a move that could hurt profit of GameStop Corp, the largest dealer of used videogames.
GameStop shares retreated as much a 6 per cent in morning trading, making it one of top percentage losers on the New York Stock Exchange.
Wal-Mart said yesterday its trade-in service would accept games for popular consoles like the Sony Corp's PlayStation3 and Microsoft Corp's Xbox 360, and customers could in return buy anything at Walmart and Sam's Club.
"Gaming continues to be an important business for us and we're actively taking aim at the $2 billion pre-owned videogame opportunity," Duncan Mac Naughton, chief merchandising and marketing officer for Walmart US, said in a statement.
The move would see Wal-Mart take on retailers such as Best Buy Co and Target Corp, and GameStop, which also offered trade-in programmes for used videogames. Games of the type are refurbished and sold later.
While GameStop would not likely lose market share, it would be forced to enter into a price war to both buy used games and to sell the refurbished games, according to Stifel analyst David Schick.
"We know that WMT (Walmart) "invests in price" ... and we expect GME (Gamestop) will match an increasingly competitive marketplace to protect (market) share," Schick wrote in a note to clients.
Microsoft shares were up 4.3 per cent and analysts at Barclays hiked the stock's price target to $44 from $43.
''Microsoft is arguably the leader in the cloud services market with Windows Azure and Office 365. It can drive better earnings growth as it transitions its ubiquitous on-premise install bases (Office and Windows Server) to its cloud platforms,'' analyst Raimo Lenschow said in a report. The stock has been rated as overweight by Barclays.