GameStop Q4 loss widens; sales guidance disappoints

4/3/2019
GameStop Corp.’s losses mounted in the fourth quarter as the company continues to deal with headwinds from the decline of physical game disc sales and the changing gaming environment.

The nation’s largest video game retailer on Wednesday reported sales that were below analysts’ estimates and issued disappointing fiscal 2019 sales guidance. It did not give earnings guidance because it is in the early stages of a cost-cutting project and recently hired a new CEO, George Sherman, who takes the reins on April 15.

Despite the difficult quarter, GameStop executive chairman Dan DeMatteo expressed confidence that the company will grow in the future.

"We are excited to move forward under George's leadership as we refine our strategic direction and implement several initiatives under development to strengthen the company for the future and drive sustainable growth and profitability," DeMatteo said.

GameStop is working to transform itself from a traditional video game retailer to a “cultural experience” for gamers. Last week, GameStop announced a series of partnerships in the booming esports industry, including an alliance with Complexity Gaming to open the GameStop Performance Center, described as the most advanced esports facility in the country.

GameStop’s total revenue fell 7.6% to $3.06 billion in the quarter ended Feb. 2. Analysts had estimated revenue of $3.28 billion. (The fourth quarter of fiscal 2018 contained 13 weeks of operating results compared to 14 weeks in fiscal 2017.)

Consolidated same-store sales rose 1.4%. Domestic same-store sales rose 3.4%, driven by the release of Call to Duty. International same-store sales fell 2.9%.

The company reported net losses of $187.7 million, or $1.84 a share, for the quarter, compared to losses of $105.9 million, or $1.04 a share, in the year-ago period. Adjusted earnings per share were $1.45.

GameStop overall posted a net loss of $673 million for the full year. Total global sales decreased 3.1% to $8.3 billion. Consolidated comparable store sales decreased by 0.3% (a 1.8% increase in the U.S. and a 4.8% decrease internationally).

The retailer forecast a 5% to 10% drop in sales for 2019 and losses of up to 5 cents a share for the first quarter.

“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. “Importantly, we will continue to leverage our powerful brand to drive growth and, with a new cost savings and profit improvement initiative in place, we will focus our efforts on driving profitability. Importantly, we will continue to leverage our powerful brand to drive growth and, with a new cost savings and profit improvement initiative in place, we will focus our efforts on driving profitability.”

GameStop operates over 5,800 stores across 14 countries.
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