Shares of video-game retailer GameStop Corp. (NYSE: GME) slumped Tuesday after the company unexpectedly reported lower-than-expected holiday sales and cut its guidance for the fiscal fourth quarter. This report was unexpected enough that it is acting as a drag in the video sector.

The results reflected declines in video game sales, which fell 22.5% from a year ago to $1.08 billion over the near nine weeks that ended on Jan. 4. The decline in game sales were offset by a 98% jump in sales of new game consoles from $524.5 million to $1.05 billion.

Sony Corp. (NYSE: SNE) and Microsoft Corp. (NASDAQ: MSFT) introduced new game consoles for the holidays. Sony sold 4.2 million PS4 units, while Microsoft sold 3 million Xbox One consoles over the holiday season. This should have helped GameStop, but it did not.

For the period overall, GameStop sales were up 9.3% to $3.15 billion. Same-store sales, sales at stores open at least a year, were up 7.1% from a year ago and 17.7% at international locations.

GameStop now expects to earn $1.86 to $1.95 a share in the January quarter, lower than the $1.97 to $2.14 per share previously offered. The consensus Wall Street estimate was $2.14. For the year, the company is estimating earnings at $2.96 to $3.06 per share, down from prior guidance of $3.08 to $3.25. Again, this is just not what most analysts and investors were expecting to hear.

Retailers have reported soft video game sales for several months, with analysts citing increasing interest in games for mobile devices. At the same time, many gamers have been buying new consoles rather than games, and there is increasing competition from online retailers.

Microsoft shares were up $0.28, or 0.8%, to $35.27. Sony ADRs were down $0.15 to $17.40. But shares of Activision Blizzard Inc. (NASDAQ: ATVI), producer of Call of Duty, and Take-Two Interactive Software Inc. (NASDAQ: TTWO), which makes the popular Grand Theft Auto game, were lower in reaction to the GameStop report. Activision was off $0.68, or 3.5%, to $17.19. Take-Two was down $0.36 to $17.10. Electronic Arts Inc. (NASDAQ: EA) fell $0.43, or 1.3%, to $21.95.

GameStop shares were down as much as 20% on Tuesday and were down about 19% at $36.74 in late morning trading. They are now down more than 35% from a peak of $57.59 seen in November.

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