GameStop Earnings Preview: Weak Holiday Season Likely To Impact Results
GameStop (NYSE: GME) is scheduled to post its fourth quarter and full year results on Thursday, March 23. The changing landscape in the gaming industry, with companies focusing more on digital sales compared to hardware sales, has negatively impacted the company’s performance. In the first nine months of the last year, the company’s net sales declined almost 5% over the prior year period to $5.6 billion while net income per share declined 4% on a year-over-year (y-o-y) basis. This trend is likely to continue, and impact both the company’s top line and bottom line performance in its Q4 results.
The table below shows consensus expectations for GameStop in the quarter ended December. The company is expected to report revenues of nearly $3.12 billion, which would signify an 11.3% y-o-y decline, and non-GAAP earnings per share of $2.29, which would be a decline of 5% over the same period last year.
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In January, GameStop reported a 16.4% decline in global sales during the holiday season (November and December). Total comparable store sales declined almost 19% in the same period. This is likely to impact the company’s results in the fourth quarter, which is traditionally the most important period for the company due to the seasonal strength provided by the holiday season. GameStop attributed the weaker-than-expected comps to weak sales of Call of Duty: Infinite Warfare and Titanfall 2. The holiday season also witnessed declines in hardware and software sales. New hardware sales decreased 30% over the prior year period, primarily due to weak sales of PlayStation 4 and Xbox One. In the same period, software sales declined 23% due to a reduced number of game launches and lower average selling price.
GameStop has been diversifying its business portfolio by acquiring technology brand stores to cater to a larger audience with different needs. The company operates a number of tech brand stores selling non-game electronics such as mobile phones and Apple devices, as well as pop culture collectibles. The segment has been performing well and we expect that to continue, primarily due to strong sales of Apple and Samsung phones.
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