GameStop (GME 13.215, +0.015, +0.11%) opened down 3.0% after reporting
mixed results for the first quarter.
Shares of GameStop have been under heavy pressure since late
2015, reflecting the retailer's struggle to adjust to a changing distribution
environment that has seen a significant increase in direct sales by game
publishers through online channels.
The company reported above-consensus first quarter earnings
of $0.38/share on a 5.5% year/year decline in revenue to $1.93 bln, which was
worse than expected.
Consolidated comparable store sales fell 5.3% due to an
11.6% decline in international sales and a 2.6% drop in U.S. sales. New
hardware sales declined 7.9% while new software sales declined 10.3%. Some of
the weakness resulted from a difficult comparison from the previous year due to
the launch of the Nintendo Switch console. Pre-owned sales fell 5.8%.
Non-GAAP digital receipts grew 24.2% when excluding the
impact of the sale of Kongregate in July 2017. On an unadjusted basis, non-GAAP
digital receipts rose 16.2% to $273.70 mln.
Technology Brands sales fell 16.1% to $169 mln due to
reduced promotional activity and a previously disclosed change in AT&T's
dealer compensation structure.
Looking ahead, GameStop expects full year earnings between
$3.00/share and $3.35/share, which encompasses current market expectations.
Revenue for the full year is expected between $8.67 bln and $9.04 bln, which
also envelops current market estimates. Comparable store sales, excluding tech
brand stores, are expected to decline up to 5.0%.
In addition to reporting earnings, GameStop announced that
former Microsoft executive Shane Kim will serve as interim CEO until a
permanent replacement is named.