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.
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