GameStop Corp GME reported mixed financial numbers for the fourth quarter of fiscal 2015, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Adjusted earnings per share of $2.40 beat the Zacks Consensus Estimate of $2.25 and also increased 11.6% year over year. The company’s bottom-line results were primarily driven by robust growth in digital receipts and core video game business.
On the other hand, GameStop reported revenues of $3,525 million that missed the Zacks Consensus Estimate of $3,567 million. However, the top line improved 1.4% year over year.
Consolidated comparable-store sales (comps) rose 3.1% and domestic comps jumped 3%, whereas international comps increased 3.3%.
By sales mix, new video game hardware sales went up 1.6% to $822 million. New video game software sales fell 10.8% to $1,149.8 million.
Strength was noted in the Mobile and Consumer Electronics category as sales increased 16.7% to $208.6 million. Video Game Accessories sales too grew 7.6% to $288.7 million.
Pre-owned and Value Video Game Products category’s sales of $729.3 million were flat year over year. An increase in the sales of downloadable content and mobile digital sales drove 9.7% growth in adjusted digital receipts to $404.5 million.
The Technology Brands segment reported revenue growth of 57.4% to $177.9 million. In the reported quarter, the company added 202 net Technology Brand stores. 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 reported quarter, gross profit increased 6.8% to $1,043.2 million, while gross margin expanded 150 basis points to 29.6%, backed by rapid growth across the digital, mobile and collectibles categories.
Other Financial Aspects
GameStop ended the quarter with cash and cash equivalents of $450.4 million, net receivables of $176.5 million, and shareholders’ equity of $2,081 million.
During the quarter, GameStop bought back 1.60 million shares at an average price of $31.28 for $50 million. At the end of the fourth quarter, the company had $245.3 million left under its repurchase authorization.
Guidance
The company anticipates fiscal 2016 sales to be in the range of flat to positive 3%, whereas comps are expected to be between negative 3% and 0%.
For the first quarter, management projects sales growth in the range of negative 7% to negative 4%, and comps decline in the band of 7%–9%.
The company envisions earnings in the range of $3.90–$4.05 per share for fiscal 2016 and between 58 cents and 60 cents for the first quarter.
The current Zacks Consensus Estimate for the first quarter and fiscal 2016 stands at 70 cents per share and $4.08 per share, respectively, and could witness downward revisions in the coming days.
GameStop expects to incur $160–$170 million in capital expenditures during the fiscal.
Zacks Rank
At present, GameStop carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is hhgregg, Inc. HGG, which carries a Zacks Rank #2 (Buy).
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