GameStop Shares Drop Following Q4 Sales Miss, Lower Guidance

Shares of GameStop Corp. (GME) fell more than 7 percent Tuesday afternoon after the video game seller missed Street estimates on revenue and issued pessimistic sales guidance for the fiscal year.

GameStop reported fourth-quarter sales of $3.06 billion, missing the analyst consensus estimate of $3.28 billion by more than 6.7 percent. The figure represented a 12.7-percent drop from the same period last year. The company projected a drop of 5-10 percent in 2019 sales and comparable store sales.

Adjusted earnings of $1.60 per share beat the Street estimate of $1.58 but was well below last year's quarterly figure of $2.02.

Highlights

  • New hardware sales decreased 9.8 percent, with an increase in Nintendo Switch sales offset by a decline in Xbox One X sales due to its strong launch in the prior year and the impact of the 53rd week in fiscal 2017.
  • New software sales decreased 7.8 percent, driven by key titles launching earlier in the year compared to last year and the impact of the 53rd week in fiscal 2017.
  • Accessories sales increased 18.8 percent on the continued strength of controller and headset sales.

GameStop Executive Chairman Dan DeMatteo said the company would be significantly reducing leverage through the retirement of $350 million in outstanding notes.

Chief Operating Officer Rob Lloyd pointed out that the company had new hardware sales for the year in line with last year, excluding an unusual 53rd week in fiscal 2017, but said the company knows it faces challenges.

"As we think about 2019 and beyond, we recognize the challenges facing our pre-owned video game business and are prepared to address them as we continue to evolve our business model going forward," Lloyd said in the press release. "Importantly, we will continue to leverage our powerful brand to drive growth and, with a new cost savings and profit improvement initiative in place, we will focus our efforts on driving profitability."

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