GameStop Closing Stores After A Rough Quarter

Videogame chain GameStop Corp. (NYSE:GME) reported that its sales and earnings fell by double digits in the latest period. Overall, fourth-quarter profit fell 16 percent to $208.7 million, or $2.04 a share. On an adjusted basis, profit fell to $2.38 a share from $2.40 a year earlier, still topping a Thomson Reuters estimate of $2.28. Fiscal fourth-quarter global sales decreased 13.6 percent to $3.05 billion. Comparable sales declined 16.3 percent, falling in line with analysts’ estimates.

The company reported sales declines in almost all of its segments during the fourth quarter of its fiscal year. New software sales fell by 19.3 percent for the quarter, while hardware sales declined 29.1 percent. The company also said that its video game category has become “weak.”

GameStop lost some market share during the holiday season due to discounting. Chief Executive J. Paul Raines said publishers started cutting prices earlier than expected. Comparable sales fell 20.8 percent year-over year during the holiday quarter.

One bright spot for the company has been its collectibles business. Collectibles saw sales surge 59.5 percent in the year that just ended. The company predicts that sales in the business will increase another 30 percent to 40 percent this year and become a $1 billion annual business by the end of 2019. GameStop had 86 collectible stores as of Jan. 28 and plans to open an additional 35 collectible stores this year.

Shares of GameStop fell more than 13 percent after the announcement, closing down around $20 per share. The company’s shares are down more than 30 percent over the past 12 months and more than 18 percent year-to-date. The stock has an all-time intraday high of $63.77, reached in 2007, and an all-time intraday low of $3.75 per share, reached in 2003.

GameStop says that traffic at its brick-and-mortar locations has slowed as it faces more competition from big-box retailers such as Target and Wal-Mart, and e-commerce giant Amazon. As a result, the company said it expects to close between 2 to 3 percent of its global store footprint in 2017, affecting at least 150 stores.

GameStop currently operates more than 6,600 stores globally, including 4,400 in the United States. GameStop didn’t indicate where the closings would happen. It’s unclear how many domestic stores the Texas-based company plans to close.

This financial year, GameStop expects to earn $3.10 to $3.40 a share and believes sales will range from a 2 percent decline to a 2 percent increase. Polled analysts are predicting $3.75 a share on a 0.67 percent revenue increase, according to Thomson Reuters.

Chief Financial Officer Rob Llyod said in a statement that GameStop will no longer provide quarterly earnings nor same-store-sales guidance moving forward. Lloyd said “We believe that providing only annual guidance will reduce investor distraction as we continue to diversify the company and seek to maximize long-term shareholder value.

 

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