GameStop Corporation (GME) has lost much of its momentum since it reported holiday sales results. Estimates have shown a downtrend since the company trimmed its guidance. The company lowered its earnings outlook, blaming sluggish sales of Xbox 360 and PlayStation 3 software during the holiday period that resulted in a 22.5% drop in new software category sales.
This Grapevine, Texas based company now anticipates fourth-quarter earnings between $1.85 and $1.95 per share and fiscal year 2013 earnings in the band of $2.96 to $3.06 per share. Earlier, management 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.
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 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 Estimate, 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 4.7% to $3.89 per share for fiscal 2014 in the past 60 days.
However, on the brighter side, GameStop’s global sales during the nine-week holiday period ended Jan 4, 2014 jumped 9.3%, while comparable-store sales rose 10.2%. New hardware sales surged 99.8%, whereas pre-owned category sales jumped 7% during the period. Management now envisions comparable-store sales for the fourth quarter and fiscal 2013 to dovetail with the upper end of the previously provided guidance range.
The company continues to branch out and has evolved as a mixed retailer of physical and digital gaming as well as electronics products. The company’s venture in digital, iDevice and gaming tablet businesses would be accretive to its results. The company’s buy-sell-trade model of selling new games and buying back used games and PowerUp Rewards program make it a popular shopping destination.
GameStop, which competes with Amazon.com Inc. (AMZN), currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Other better-ranked stocks worth considering in the retail sector include Foot Locker, Inc. (FL) and Finish Line Inc. (FINL), both holding a Zacks Rank #2 (Buy).
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