GameStop Corp.’s (NYSE: GME) shares were down over 18% in afternoon trade on Wednesday after the company reported another weak quarter. The company missed market estimates for both revenue and earnings in the third quarter of 2019.
Both total sales and comparable store sales declined in the
double digits with total sales missing expectations. The company also reported
a wider-than-expected loss for the quarter. Product sales declined across all categories
except collectibles.
During the quarter, GameStop repurchased 22.6 million shares for nearly $116 million and had $419.4 million in long-term debt at the end of the period.
The company stated in its quarterly conference call that the
anticipated releases of new consoles in late 2020 was pressurizing the current
generation of consoles and related games as consumers await new technology. This
trend is expected to continue over the next couple of quarters until the launch
of the new consoles.
As part of its business improvement efforts, GameStop decided
to wind down its operations in the Nordic region of Europe, including Denmark,
Finland, Norway and Sweden. The company believes this effort will yield around
$15 million in EBITDA run rate improvement. GameStop also managed to reduce
inventories by over 30% during the quarter. These initiatives are helping the
company generate strong cash flow despite the sales decline.
GameStop has guided for full-year 2019 comparable store sales to decline in the high-teens and adjusted EPS to come in the range of $0.10-0.20. The company expects to generate between $200-220 million in adjusted free cash flow for the year.