GameStop (GME 17.87, -2.09, -10.5%) provided investors with an update on its holiday sales performance and it also issued an update for its fiscal 2017 earnings guidance. If GameStop had stopped with its holiday sales update, the fortunes of its stock today might be much improved, but alas, there was more to the company's story that did not sit well with investors.
Like many other retailers, GameStop saw a welcome pickup in sales for the nine-week holiday period ended December 30, 2017. Total global sales for the company increased 10.6% to $2.77 billion; total comparable sales increased 11.8%; and worldwide omnichannel sales increased 21.5%.
For GameStop, though, the comparison bar was quite low.
Holiday sales in 2016 declined 16.4% and comparable sales plummeted 18.7%. Failing to show growth in those key metrics for the 2017 holiday period would have been disastrous, yet the company leveraged the popularity of the Nintendo Switch and Xbox One X gaming consoles, and an increase in its collectibles business, to hurdle the low sales bar with ease.
The one, notable fly in GameStop's sales ointment was Technology Brands sales. They dropped 18.6% in the face of limited iPhone X availability and changes AT&T made to the compensation structure in 2017.
GameStop added that it is going to take a non-cash impairment charge in the range of $350 million to $400 million in the fourth quarter. That charge will be related primarily to its Technology Brands business, which has been adversely impacted by a longer upgrade cycle for new mobile devices and changes made by AT&T to the compensation structure in 2017.
In related news, it is GameStop's expectation that its full-year fiscal 2017 comparable sales will increase between 4% and 6%, versus a prior view of up low to mid single digits, and that its adjusted earnings per share will be near the middle of its previously announced full-year 2017 guidance of $3.10 to $3.40.
The midpoint of the EPS guidance range is $3.25, yet analysts' average expectation is closer to the upper end of the guidance range.
Prior to today's update, GME had risen 11.2% in 2018, yet that move has been undone by today's selling interest. Over the last 52 weeks, shares of GME have declined 28%.