Assassin’s Creed kills Q3 comps at GameStop
Increased digital integration at GameStop is driving engagement with customers, but the delayed launch of a popular video game negatively impacted third quarter sales and made it hard for management to accurately forecast holiday sales.
The launch of Assassins Creed Unity got pushed back from a planned October launch and that proved a huge headwind for GamesStop which reported a 2.3% decline in same store sales for the quarter ended Nov. 1. Total sales for the company declined 0.7% to $2.11 billion.
“Overall, most of our major product categories performed very well, but our third quarter results were impacted by Assassin’s Creed Unity moving out of October,” said GameStop CEO Paul Raines. “As we look at the holiday quarter, we are focused on relentlessly applying our competitive advantages: convenience, strong CRM, knowledgeable associates and value through our unique forms of currency, which include buy-sell-trade and the new PowerUp Rewards credit card, to deliver a successful quarter.”
How successful the company is depends on where sales fall on an extraordinarily wide guidance range which envisions fourth quarter comps declining as much as 5% or increasing up to 2%. The profit forecast is also quite wide with earnings per share ranging from $2.08 to $2.24, representing a 10% to 18.5% increase from the prior year. Full year earnings are expected to range from $3.40 to $3.55 with full year same store sales ranging from a 2% to 5% increase.
The company is heading into the holidays with momentum evident in many areas of its business. For example, third quarter sales of new hardware increased 147.4% and the company said it accounted for 47.3% of the new software market. The pre-owned/value category, a business Walmart entered this year, recorded its third straight quarter of positive growth with a 2.6% increase. Sales in the mobile and consumer electronics category rose 125%, according to the company.
Another positive highlighted by the company was omnichannel where sales improved 20.1%, led by 91.4% growth in buy online, pick up in store. In addition, GameStop said its mobile app has been downloaded six million times and 69% of visits to Gamestop.com originate from a mobile device.
The picture looked less bright from a profitability standpoint. Even when earnings were adjusted to exclude a one time charge, net income declined to $64.3 million compared to $68.6 million. Earnings per share decline a penny to 57 cents and were aided by the highest volume of share repurchase activity since the company began its stock buyback program.
GameStop said its spent $144 million to buy back 3.58 million shares at an average price of $40.25. Year-to-date, 6.8 million shares, or $271.7 million of stock, have been repurchased. In early November, the company approved a new $500 million share repurchase plan, replacing the remaining $176 million available on the existing authorization.