GameStop (GME 16.07, -0.07, -0.43%) shares opened lower by 5.5% but
have since recovered to nearly flat levels after the company reported mixed
results. The early selling pressured the stock, which has been trapped in a
multi-year decline, back near its 200-day moving average (15.47).
GameStop reported below-consensus second quarter earnings of $0.05 per share on revenue that declined 2.4% year/year to $1.65 bln but was still ahead of expectations.
With publishers selling an increased number of games directly to consumers via digital channels, GameStop has had a difficult time adjusting to the new selling model. As a result, the struggling retailer confirmed plans to continue engaging with third parties about a potential transaction. Acquisition speculation circulated earlier this week, helping to boost the stock’s price by more than 15%.
Second quarter consolidated comparable store sales declined 0.5% as a 2.4% increase in the United States was outweighed by a 6.4% decline in the international market. New hardware sales grew 20.1% thanks to the launch of the Xbox One X while sales of Nintendo Switch and PS4 remained strong. With no new major game launches during the quarter, new software sales declined 18.5%. Pre-owned sales fell 9.9%.
Digital receipts grew 15.3% to $255.9 mln when excluding last year's results from the Kongregate business, which was sold in July 2017. Sales of Collectibles grew 15.7% to $141.7 mln due to expanded licensed merchandise offerings, new offerings, and growth in apparel sales.
The company was able to realize some efficiency improvements as Technology Brands operating earnings grew 35.3% to $20.3 mln even though Technology Brands sales fell 10.3%.
Looking ahead, the company expects that earnings for the full year will be between $3.00 per share and $3.25 per share. Total sales are expected to be down between 2.0% and 6.0% while comparable store sales, excluding Tech Brand stores, are expected to decline as much as 5.0%.
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