GameStop Corp. GME started fiscal 2018 on a mixed note, with earnings surpassing the Zacks Consensus Estimate and revenues lagging the same in the first quarter. Apart from this, the company witnessed year-over-year decline on both the fronts. Further, consolidated comparable store sales (comps) declined year over year after increasing in the last few quarters. Meanwhile, the Grapevine, TX-based company kept the fiscal 2018 view intact.
However, results were a let-down for investors, as this Zacks Rank #3 (Hold) stock lost about 3% during the after-market trading session. In fact, GameStop’s shares have plunged 17.4% over the past three months, wider than the industry’s 9.1% decline.
In the quarter under review, adjusted earnings per share tumbled 39.7% year over year to 38 cents. However, earnings surpassed the Zacks Consensus Estimate of 35 cents – which marked the company’s third straight quarter of earnings beat.
Net sales declined 5.5% (down 7.5% on a currency-neutral basis) year over year to $1,934 million, which fell short of the Zacks Consensus Estimate of $1,957 million. The video game retailer lagged estimates after four straight quarters of sales beat.
GameStop Corp. Price, Consensus and EPS Surprise
GameStop Corp. Price, Consensus and EPS Surprise | GameStop Corp. Quote
Let’s Delve Deeper
Consolidated comps decreased 5.3%, reflecting a decline of 11.6% at international locations and 2.6% at domestic locations.
By sales mix, new video game hardware sales declined 7.9% to $359.2 million while new video game software sales were down 10.3% to $466.7 million. Difficult year-over-year comparisons dented sales in both the categories. More specifically, sales in both the categories were hampered by the launch of the Nintendo Switch in the year-ago quarter. Likewise, software sales were impacted by the launch of strength of titles across platforms in the prior fiscal.
Also, pre-owned and value video game products sales came in at $495.7 million, down 5.8% year over year. Worldwide omnichannel sales declined 46% owing to limited allocation of the Nintendo Switch at launch.
However, Video game accessories sales jumped 13.1% to $199.1 million. Also, non-GAAP digital receipts increased 16.2% to $273.7 million, while GAAP digital sales declined 2.5% to $43 million.
Technology Brands sales were down 16.1% to $169 million due to overlap in AT&T’s dealer compensation structure and lower promotional activity.
Nevertheless, Collectibles sales surged 24.4% to $142.4 million buoyed by continued expansion of licensed merchandise offerings and unique product offerings.
Gross profit decreased 6.4% to $657.3 million owing to lower net sales. Further, gross margin contracted 30 basis points (bps) to 34%.
SG&A expenses inched up 0.5% to $566.1 million in the reported quarter. Adjusted operating income declined 35.7% to $69.7 million, while adjusted operating margin contracted 160 bps to 3.6%.
Other Financial Aspects
GameStop ended the quarter with cash and cash equivalents of $247.2 million, net receivables of $156.4 million, net long-term debt of $818.6 million and shareholders’ equity of $2,183.5 million.
For fiscal 2018, management maintains capital expenditure projection in the range of $110-$120 million.
Guidance
GameStop reaffirmed the fiscal 2018 guidance. The company continues to expect fiscal 2018 sales decline of 6% to 2% and comps are expected to remain flat or decline around 5%. For the year, management continues to project earnings per share in the range of $3-$3.35. The Zacks Consensus Estimate for fiscal 2018 earnings is pegged at $3.03, which is close to the lower end of the guided range.
Interested in the Retail Space? Check These Out
Urban Outfitters, Inc. URBN delivered an average positive earnings surprise of 19.8% in the trailing four quarters. It has a long-term earnings growth rate of 12% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Fossil Group FOSL has an average positive earnings surprise of 54.1% for the last four quarters and carries a Zacks Rank #2.
Burlington Stores, Inc. BURL has a long-term earnings growth rate of 18.7% and carries a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
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
Be the first to comment