Shares of GameStop (GME) were sliding in postmarket trading after the video game retailer reported lower-than-expected quarterly results and cut its guidance for fiscal 2019.
EARNINGS: After the market close, GameStop reported Q3 earnings per share of (49c) on revenue of $1.44B, compared to analysts' expectations for 11c and $1.62B, respectively. Consolidated comparable store sales for the quarter fell 23.2% year-over-year, while new hardware sales decreased 45.8% and new software sales decreased 32.6%. Accessories sales declined 13.4% in Q3, and pre-owned sales dropped 13.3%. Meanwhile, collectibles sales rose 4.3%, with continued domestic growth in both domestic and international stores, the company said.
Commenting on the results, CEO George Sherman said, "Our third quarter results continue to reflect the prevailing industry trends, most notably the unprecedented decline in new hardware sales seen across the market as the current generation of gaming consoles reach the end of their lifecycle and consumers delay their spending in anticipation of new hardware releases. With console makers set to introduce new and innovative gaming consoles late next year, we anticipate this trend to continue until the fourth quarter of 2020. Despite the current top-line trends, we are pleased with the continued strong progress that we are making against our strategic initiatives as we transform GameStop for the future. We remain on track to achieve our $200 million annualized operating profit improvement goal, by 2021 and we believe our strategic initiatives will enable to us to achieve our long-term growth and profit objectives as we fully leverage our unique leadership position and brand in the video game space.”
GUIDANCE: Looking ahead, GameStop cut its adjusted EPS view for fiscal 2019 to 10c-20c from $1.15-$1.30, and said it expects comparable store sales for the year to decline in the high-teens. Wall Street had expected the retailer to report FY19 EPS of $1.21. In addition, the company sees FY19 capital expenditures of $80M-$85M.
CALL COMMENTS: On its quarterly conference call, GameStop said that new consoles expected to arrive in late 2020, including the PlayStation 5 (SNE) and Microsoft's (MSFT) Scarlett, are putting pressure on the current generation of consoles and games as consumers wait for new technology and game publishers adjusted their long-term plans. The company said it is feeling that pressure from the new consoles more than other retailers, and that this pressure is likely to remain until the new consoles come out. GameStop added, however, that the company is taking "decisive action" on its strategic initiatives to turn things around, though it noted that improving its business will not be a "quick fix." In addition, the retailer said the decline in PS4 and Xbox One software sales in the quarter are in part due to the comparison to the "strong" 2018 software lineup for those consoles, which included games like "Marvel's Spider-Man" and Activision's (ATVI) "Call of Duty: Black Ops 4."
PRICE ACTION: In after hours trading, GameStop shares dropped 16% to $5.47.
GameStop
+0.18 (+2.85%)
Symbol now SONY
+0.34 (+0.52%)
Microsoft
-0.17 (-0.11%)
Nintendo
+ (+0.00%)
acquired by MSFT
+1.56 (+2.87%)