Earnings preview: What to look for when GameStop reports Q1 2019 results

GameStop Corp. (NYSE: GME) is scheduled to report first quarter 2019 earnings results on Tuesday, June 4, after regular trading hours. Analysts expect the company to report a loss of $0.02 per share on revenue of $1.67 billion, reflecting year-over-year declines in both metrics.

GameStop has been struggling with falling sales in its video
game hardware, video game software and preowned categories as well as declining
gross margins. The company has not had many new or exciting launches and this
has negatively impacted sales.

The video game accessories, collectibles and digital
segments have posted sales increases but these have not proven adequate to
offset the weakness in the preowned business category. GameStop needs a new game
plan to turn around its business and this is the main factor investors will be
tuned into during the first quarter announcement.

Last month, George Sherman took over as CEO and it will be
interesting to watch what his plans are for the business. Last week, GameStop
announced new appointments to its management team along with a revamp of its organizational
structure.

James Bell was appointed as the new CFO. As part of its organizational
structure changes, the company decided to eliminate the position of COO and add
the roles of Chief Merchandising Officer and Chief Customer Officer. This indicates
the company could be getting ready to lay out new strategies in the upcoming
months.

In the fourth quarter, GameStop beat earnings estimates but missed sales forecasts and provided a weak outlook. Sales dropped over 7% to $3.06 billion while adjusted EPS increased 21% to $1.60. Comparable sales increased 1.4%.

For the first quarter of 2019, the gaming firm has guided
for earnings in the range of breakeven to a loss of $0.05 per share. For
fiscal-year 2019, GameStop expects both sales and comparable sales to decline
in the range of 5-10%.

GameStop’s shares have fallen over 38% year-to-date and over 44% during the trailing 52 weeks.

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