Markets

GameStop Misses on Q3 Earnings & Revenues, Shares Down

GameStop CorpGME posted dismal third-quarter fiscal 2015 results. Both adjusted earnings per share of 54 cents and revenues of $2,016.3 million missed the Zacks Consensus Estimate of 59 cents and $ $2,102 million, respectively.

The company's results were primarily marred by lower-than-expected new software and hardware sales as well as delay in the opening of Technology Brands store. Following the bleak quarterly numbers, the company's shares declined more than 17% during the pre-market trading session.

Gamestop Corporation (GME) - Earnings Surprise | FindTheCompany

On a year-over-year basis, adjusted earnings and revenues declined 5.3% and 3.6%, respectively.

Including one-time items, earnings per share came in at 53 cents, in comparison to 50 cents in the year-ago period.

Consolidated comparable-store sales (comps) declined 1.1% and domestic comps decreased 1.7%, whereas international comps increased 0.3%.

By sales mix, new video game hardware sales were down 20.4% to $358.1 million.New video game software sales fell 9.3% to $674.5 million, marred by tougher year-over-year comparison with Destiny and Super Smash Bros.

Strength was seen in Mobile and Consumer Electronics category as sales were up 31.1% to $165.2 million. Video Game Accessories sales, too, grew 4.1% to $138 million.

Pre-owned and Value Video Game Products category's sales of $502.2 million were up a mere 0.6% primarily due to increase in sales of PlayStation 4 and Xbox One pre-owned. Increase in sale of Destiny: The Taken King led to 8.7% growth in adjusted digital receipts to $228.6 million. However, forex headwinds primarily led to a 27.1% dip in digital sales to $40 million.

The Technology Brands segment reported revenue growth of 64.2%. This segment is expected to sustain its growth momentum, backed by its collaboration with AT&T, Inc. T and the Apple Inc. AAPL .

During the quarter, gross profit increased 5.4% to $655.6 million while gross margin expanded 280 basis points to 32.5% owing to rapid growth across digital, mobile and collectibles categories.

Other Financial Aspects

GameStop ended the quarter with cash and cash equivalents of $186.2 million, net receivables of $185.5 million and shareholders' equity of $1,941.6 million.

During the quarter, GameStop bought back $44.9 million worth of shares and remains on track to buy back $200 million worth of stock in fiscal 2015. At the end of the third quarter, the company had $295.3 million left under its repurchase authorization.

Guidance

Despite reporting dismal quarterly numbers, management reiterated its previous full year earnings guidance. The company expects new video games, together with contributions from diversified AT&T, Apple as well as ThinkGeek businesses and its in-store collectibles offerings to drive fourth-quarter earnings. For 2015, the company estimates earnings per share in the range of $3.66 to $3.86. The company expects full-year comps to be in the range of +2.0% to +6.0%.

For the fourth quarter, the company expects earnings per share in the range of $2.12 to $2.32 in comparison to adjusted earnings per share of $2.15 in the prior-year quarter. Comps are anticipated to be around -1% to 6%.

At present, GameStop carries a Zacks Rank #4 (Sell). A better-ranked stock in the retail space is Amazon.com, Inc. AMZN , which carries a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

GAMESTOP CORP (GME): Free Stock Analysis Report

AT&T INC (T): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AMZN T GME AAPL

Other Topics

Earnings Stocks

Latest Markets Videos