GameStop (GME 21.73, -1.89) has given up 8.0% in pre-market despite beating expectations for the first quarter. The decline leaves the stock roughly one point above this year's low.
The video game retailer reported above-consensus first quarter earnings of $0.58 per share on a 3.8% year-over-year increase in revenue to $2.05 billion, which was also ahead of expectations.
Consolidated comparable store sales grew 2.3%, which masked a 2.4% consolidated comparable store sales decline in the U.S. thanks to 17.1% growth in the international segment.
GameStop saw a spike in its new hardware sales, which jumped 24.6% to $389.90 million, mostly due to demand for the newly-released Nintendo Switch. Sales of Collectibles also showed strong growth, spiking 39.1% to $114.50 million, thanks to strong global sales of Pokemon-related products. GameStop opened nine Collectibles stores, increasing its total global count to 95.
While the company benefited from demand for the new Nintendo console, it is worth noting that hardware releases are infrequent and sales are likely to moderate after an initial surge, which will return focus to the company's core business, which is game sales.
New video game software sales fell 8.2% to $520.50 million due to difficult comparisons with highly-anticipated releases from last year. Pre-owned sales fell 6.2% to $526.20 million, which is roughly what the company expected.
Digital sales increased 3.0% to $44.10 million, but the segment makes up just 2.2% of total revenue. The small digital presence puts GameStop at a disadvantage, considering console and PC users have the option of purchasing many titles for instant delivery through avenues like PlayStation Store, Xbox Store, and Steam, among others.
Technology brands sales jumped 21.5% to $201.40 million thanks to growth at GameStop's AT&T authorized retail stores. Segment adjusted operating earnings declined 2.1% to $18.40 million.
Looking ahead, GameStop reiterated its expectations for full year earnings between $3.10 and $3.40 per share. Comparable store sales are expected between -5.0% and 0.0%.