Analysts do not expect this scenario to change in the second quarter and revenue is expected to decline double digits in the absence of any new strategy to drive growth. The Street has projected a loss for the second quarter as opposed to the earnings generated in the past two quarters.
GameStop’s shares have fallen 66% thus far this year and
investors are concerned about its future. The company is struggling in a tough
competitive environment dominated by digital downloads and online games.
However, not everyone is pessimistic about the stock. Last
month, investor Michael
Burry disclosed that his firm Scion Asset Management has a 3% stake
in GameStop and also stated that the company’s balance sheet was in good shape.
Burry believes that GameStop’s hardware sales will benefit from the release of Sony (NYSE: SNE) and Microsoft’s (NASDAQ: MSFT) next-generation consoles, which are slated for next year, and that this will help the company rebound.
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In the first quarter of 2019, GameStop reported better-than-expected earnings but missed sales estimates. Net sales dropped 13% to $1.5 billion while adjusted EPS plunged 77% to $0.07. Analysts had forecast a loss of $0.03 per share. Comparable store sales declined 10.3%.
Last quarter, the
board of directors decided to eliminate the quarterly dividend in order to
strengthen the company’s balance sheet and provide increased financial
flexibility and optionality. By not paying the dividend, the company expects to
preserve about $157 million in cash annually, based on the dividend amount paid
in 2018.
For fiscal-year 2019, GameStop expects both sales and comparable sales to decline in the range of 5-10%.