GameStop stock drops about 7% after missing Q4 sales estimates and weak outlook

Video game retailer GameStop (NYSE: GME) reported fourth quarter and full-year 2018 results after the market closed today. The company reported adjusted EPS of $1.60 on revenue of $3.06 billion for the fourth quarter. Shares of GameStop, which hit a 52-week low ($10.04) on Monday, plunged about 7% in the extended trading hours.

Analysts expected GameStop to report earnings of $1.59 per share on revenue of $3.29 billion.

Sales decreased 7.6% and comparable store sales increased 1.4%. Adjusted EPS from continuing operations stood at $1.45. GAAP net loss was $1.84 per share compared to loss of $1.04 in the prior year quarter. Fourth quarter 2018 results included asset impairment charges and other items of $334.5 million or $3.44 per share, primarily related to impairment of goodwill. GameStop completed the sale of its Spring Mobile business on January 16, 2019.

For the first quarter of 2019, the Grapevine, Texas-based gaming firm expects earnings of breakeven to a loss of $0.05 per share, consistent with the seasonally slower first half of the fiscal year.

For the fiscal year 2019, GameStop expects both, sales and comparable store sales to decline in the range of 5% to 10%.

“As we think about 2019 and beyond, we recognize the challenges facing our pre-owned video game business and are prepared to address them as we continue to evolve our business model going forward,” said Rob Lloyd COO and CFO.

The company had been mulling strategic alternatives including a sale. However, in January, the company stated that it was abandoning its plans to go on sale “due to the lack of available financing on terms that would be commercially acceptable to a prospective acquirer.”

On March 21, GameStop appointed retail veteran George Sherman as its CEO. Though Sherman is set to take charge only on April 15, investors will likely be interested in hearing out the management on this appointment, as well as the future course of action expected to improve the company’s performance.

GameStop stock, which ended Tuesday’s trading session down 2.6% at $10.10, dropped 20% since the beginning of 2019 and 21% over the last 12 months.

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