Wall Street Watch This Week: Let's Start Playing Games

Call of Duty Black Ops II
Call of Duty Black Ops II

The video gaming industry is ready to put on its game face.

Activision Blizzard (ATVI) will roll out "Call of Duty: Black Ops II" on Tuesday. The combat game is the latest installment in Activision Blizzard's Call of Duty franchise, which broke sales records with last November's release. There's no reason to believe that Tuesday's debut won't set a new record.

On Sunday, Nintendo (NTDOY) begins selling Wii U. As the first new gaming console in years, Nintendo builds on the initial success that the company had with the Wii before sales began to taper off in recent years.

The new software and hardware couldn't come at a better time. Industry tracker NPD Group is reporting that domestic retail sales of new video game products fell 25% last month. Software sales dropped 25% and hardware plunged a jaw-dropping 37%. There was a 5% uptick in console accessories, but that's not much of a silver lining to this storm cloud.

Some will argue that the data is incomplete, and rightfully so. It only tracks sales through traditional retailers. It also doesn't account for the booming digital delivery market.

However, it's clear that the tired video game industry needs a spark. If the Wii U doesn't do the trick -- and it might not, given Nintendo's financial setbacks over the past couple of years -- it will be at least a year before the PS3 or Xbox 360 gets refreshed.

It's a game that no one can afford to lose.

Other things worth watching

There will be plenty of retailers stepping up with their quarterly results, including the country's two biggest discount department store operators. Wal-Mart (WMT) and Target (TGT) don't necessarily draw the same clientele, though they both specialize in marked down staples. As the world's largest retailer, Wal-Mart prides itself in delivering low prices. Target prefers to emphasize its "cheap chic" allure, banking on the "Tar-jay" appeal to charge a little more for stylish apparel and items. Both chains will hit the register on Thursday with fresh financials ahead of the critical holiday shopping season.

Let's bring out the orange aprons. Home Depot (HD) reports on Tuesday. The leading home improvement retailer has been seeing signs of life, and not just because its northeastern stores were busy preparing folks for Hurricane Sandy and then dealing with repairs and generator requests in the aftermath. Companies that specialize in home improvement projects have been holding up pretty well this earnings season. Wood-alternative decking leader Trex (TREX) and hardwood flooring retailer Lumber Liquidators (LL) have stepped up with well-received blowout quarterly results in recent weeks. Analysts see healthy year-over-year improvement at Home Depot, too.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Nintendo and Lumber Liquidators Holdings and owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Nintendo, Home Depot, Activision Blizzard, Trex, and Lumber Liquidators Holdings and creating a synthetic long position in Activision Blizzard.