Shares of video game retailer GameStop Corp. (GME) fell sharply Thursday after the company released weaker than expected guidance for fiscal 2018. Meanwhile, third-quarter earnings and revenues topped estimates, aided by broad-based sales growth.
Adjusted earnings of the Texas-based firm climbed to $0.67 per share in the third quarter from $0.54 per share a year earlier. The bottom line also exceeded analysts’ expectations. On an unadjusted basis, the company reported a net loss of $488.6 million or $4.78 per share, compared to a profit of $59.4 million or $0.59 per share in the year-ago quarter.
Net sales moved up 4.8% annually to $2.1 billion, surpassing estimates. Consolidated comparable store sales were up 2.1% in the October quarter when sales in the local market grew 3.4%, while overseas sales edged down 0.5%.
Comparable store sales were up 2.1% in the quarter when sales in the local market grew 3.4%, while overseas sales edged down 0.5%
All the key business segments, except Pre-owned/Value and Technology Brands, registered double-digit sales growth, marking an improvement from the preceding quarter when the topline performance remained muted due to the low customer turnout and the growing popularity of online gaming.
“We experienced solid growth in the third quarter, including double-digit growth across software, hardware, accessories and collectibles, underscoring GameStop’s leadership position in video games and our unique ability to satisfy all of our customers’ entertainment needs,” said COO Rob Lloyd.
For the whole of fiscal 2018, the company expects adjusted earnings in the range of $2.55 per share to $2.75 per share. It sees full-year sales declining between 2% and 6%, reflecting the overall softness in the final months of the year. Comparable store sales are forecast to be flat to -5%. The outlook came in below analysts’ forecast.
Earlier this week, Bank of America Merrill Lynch upgraded GameStop’s stock to neutral from underperform, encouraged by the positive sales outlook for Cyber Monday. The analyst also cited the company’s stable cash flow for the upgrade.
Recently, the management announced a definitive agreement to sell the Spring Mobile business for $700 million, as part of its initiatives to enhance shareholder value.
GameStop shares dropped about 21% since the beginning of the year. The stock traded sharply lower during Thursday’s regular session and lost 12% after the earnings report.
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