GameStop Shares Fall on Weak Earnings
November 23 2015 - 10:20AM
Dow Jones News
GameStop Corp. on Monday posted third-quarter results came in
weaker than expected on lower new software and hardware sales and
delays in store openings.
Shares plunged about 15% to $33.42 in early trading.
For the current quarter, GameStop projected earnings from $2.12
to $2.32 a share, while analysts polled by Thomson Reuters expected
$2.37.
For the period ended October, sales at established stores—which
includes sales at retail stores open for at least 12 months and
online sales—fell 1.1%. The company's technology segment, which
includes its business selling smartphones, tablets and other
devices, isn't included in the figure.
The growing installed base of Microsoft's Xbox One and Sony's
PlayStation 4 consoles has boosted sales of new games as well as
used games. GameStop also has been diversifying its business,
including its technology brands segment, which sells mobile phones
and electronics in partnership with Apple Inc. and AT&T
Inc.
Chief Executive Paul Raines said expectations for the full
year—in the range of $3.66 to $3.86—haven't changed, pointing to a
solid slate of new videogames coupled with contributions from
AT&T, Apple and ThinkGeek businesses as well as in-store
collectibles offerings expected to drive fourth quarter
results.
For the third quarter, GameStop reported a profit of $55.9
million, or 53 cents a share, compared with $56.4 million, or 50
cents a share, a year earlier, when the company had more shares
outstanding. The latest period included a penny in charges related
to its recent acquisition of Geeknet and the technology brands
segment expansion. Excluding such one-time items, per-share
earnings were 54 cents compared with 57 cents. Revenue increased
3.6% to $2.02 billion.
GameStop had projected per-share earnings of 53 cents to 60
cents a share with sales from $2.09 billion to $2.18 billion.
Gross margin rose 280 percentage points.
GameStop has been rolling out its licensed merchandise and
collectibles—or "loot"--business in the U.S. In the latest period,
sales of collectible products drove a 61% increase in the company's
"other" category.
The retailer is in the early stages of the rollout of the
collectibles business, whose products carry a higher margin than
videogames. GameStop expects the segment to grow to $500 million a
year by the end of 2019.
The company in July completed its acquisition of GeekNet, parent
of online retailers ThinkGeek and ThinkGeek Solutions-which Mr.
Raines said provides an opportunity to expand the collectibles
business with exclusives, such as "Star Wars" items as well as
videogames.
ThinkGeek and ThinkGeek Solutions sells an assortment of
clothing, gadgets and videogame-themed merchandise targeted at
so-called geeks and hackers.
Technology Brands revenue surged 64.2% as the company continued
to add new stores. In the latest quarter, 105 new stores were
opened or acquired, though Mr. Raines noted there were delays in
openings.
New software sales fell 9.3%, or 4.2% excluding currency
impacts, due to a tough overlap of Destiny and Super Smash Bros. in
the third quarter last year. GameStop's sales of preowned
videogames, consoles and related equipment, which has been a profit
driver for the retailer in recent years, edged up 0.6%, and rose
4.9% excluding currency impacts.
In September the company announced it planned to hire more than
28,000 seasonal workers for the holiday season, an increase of 12%
from last year.
Write to Anne Steele at Anne.Steele@wsj.com
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(END) Dow Jones Newswires
November 23, 2015 10:05 ET (15:05 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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