GameStop

GameStop shares dropped more than 13% on Friday after the video game retailer reported a sharp drop in same-store sales though its non-gaming businesses showed strong growth.

GameStop has been diversifying away from its core gaming business as its core customers move away from physical video games to downloading games directly online. That transformation is gaining traction but the company’s fourth-quarter sales fell 13.6% to $3.05 billion, while consolidated comparable sales declined 16.3%.

Adjusted quarterly earnings of $2.38 per share topped a Thomson Reuters estimate of $2.28, but came in 2 cents lower than the same period one year ago.

The fourth quarter “was significantly impacted by … aggressive console promotions by other retailers on Thanksgiving [Day] and Black Friday,” the company wrote in its earnings release, noting that new hardware sales declined 29.1% and new software sales declined by 19.3%.

GameStop had previewed the earnings in January, saying its holiday sales fell by 18.7% and it would close an undetermined number of stores. Nevertheless, its shares fell 13.6% to $20.70 in trading Friday.

The company said Thursday it now plans to reduce its global store footprint of 7,500 stores by 2% to 3% this year, or at least 150 stores.

On the plus side, sales in GameStop’s Technology Brands stores increased by 44% in the fourth quarter to $256 million and operating earnings reached $34 million. Its collectibles business — which sells toys, clothing and novelty items licensed from video games, movies and TV shows — generated sales of $212.4 million.

“GameStop’s transformation continued to take hold in 2016, as our non-gaming businesses drove gross margin expansion and significantly contributed to our profits,” CEO Paul Raines said, adding that Technology Brands and collectibles “are expected to generate another year of strong growth” in 2017.

For the full year, GameStop is forecasting net income between $320 million and $354 million, compared to $353.2 million in 2016, and total sales to range from down 2% to up 2%. “We have persevered and we find ourselves with an abundance of business opportunities,” Raines said.

, , , , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *