Are GameStop Earnings Really That Bad?

April 3, 2019 by Chris Lange

When GameStop Corp. (NYSE: GME) released its fiscal fourth-quarter financial results after the markets closed on Tuesday, the video game retailer said that it had $1.45 in earnings per share (EPS) and $3.06 billion in revenue. That compared with consensus estimates of $1.58 in EPS and $3.28 billion in revenue, as well as the $2.02 per share and $3.5 billion posted in the same period of last year.

During the most recent quarter, total global sales from continuing operations decreased 7.6% (decreased 6.2% in constant currency), resulting in a consolidated comparable store sales increase of 1.4% (3.4% increase in the United States and 2.9% decrease internationally).

In terms of its segment sales, the company reported as follows:

  • New hardware sales decreased 9.8%, 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%, 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% on the continued strength of controller and headset sales.
  • Collectibles sales increased 3.1% to $268.8 million, with continued growth in both domestic and international stores.

Looking ahead to the 2019 full year, the company expects to see total sales down in the range of 5% to 10% and comparable store sales down in the range of 5% to 10%. Consensus estimates call for $2.68 in EPS and $8.94 billion in revenue for the year.

Dan DeMatteo, GameStop’s executive chair, commented:

This past year was a pivotal one for GameStop, capped by retail industry veteran George Sherman’s appointment as chief executive officer.  In conjunction with the board’s comprehensive review of strategic and financial alternatives, we executed the sale of Spring Mobile at an attractive valuation.  As a result, we are better positioned to drive shareholder value with an intense focus on leveraging our global gaming and collectibles business.

Shares of GameStop closed Tuesday at $10.10, in a 52-week range of $10.04 to $17.27. The consensus price target is $12.00. Following the announcement, the stock was down 12% at $8.85 in early trading indications Wednesday.

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