On Feb 4, 2014, Zacks Investment Research downgraded
), the videogame software retailer, to a Zacks Rank #5 (Strong
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Why the Downgrade?
Shares of GameStop have plunged roughly 6.5% since the company
reported its holiday sales results, when it lowered the earnings
outlook due to soft demand for Xbox 360 and PlayStation 3
software. This resulted in a 22.5% drop in the videogame
retailer's new software category sales.
Management took a cautious stance while providing guidance for
fourth quarter and fiscal 2013. The company now projects
fourth-quarter earnings between $1.85 and $1.95 and fiscal-year
2013 earnings in the band of $2.96 to $3.06 per share.
Earlier, this Grapevine, Texas based company had forecasted
fourth-quarter earnings in the range of $1.97 to $2.14 and fiscal
year 2013 earnings between $3.08 and $3.25 per share. However,
the lowered outlook was enough to hurt investors' sentiment.
Also, the company's stock has tumbled nearly 31.6% year to date.
The company's performance could be attributable to the fact that
the videogame industry is highly competitive and shoppers have
many alternatives to buy software, hardware and other video game
accessories. Moreover, retail bigwigs such as
Best Buy Co. Inc.
) have entered into the videogame market, which could dent
GameStop's sales and margins.
The dismal new software category sales and trimmed guidance
triggered a downtrend in the Zacks Consensus Estimates, as
analysts become less constructive on the stock's future
performance. This is evident from the movement witnessed in the
Zacks Consensus Estimate that fell 6.8% to $3.02 for fiscal 2013
and 6.1% to $3.83 per share for fiscal 2014 in the past 30 days.
Other Stocks That Warrant a Look
Other better-ranked retail stocks that look promising and are
expected to continue with their upbeat performance, include
) holding a Zacks Rank #1 (Strong Buy) and
Michael Kors Holdings Ltd.
) sporting a Zacks Rank #2 (Buy).