GameStop’s Poor Comparable Sales Send Shares Plummeting 7%

Video game retailer GameStop Corp. (NYSE:GME) after hours today posted in-line Q2 earnings results, but its steep comparable sales decline sent investors heading for the exits.

The Grapevine, TX-based company reported Q2 net income of $0.27 per share, matching analyst estimates. revenue fell 7.4% from last year to $1.63 billion, however, missing Wall Street’s view of $1.72 billion.

On a very sour note, comparable sales plunged 10.6% from last year.

Looking ahead, GME forecast Q3 EPS to range from $0.53 to $0.58, straddling analysts’ $0.55 view. The company also reaffirmed its full-year 2017 EPS forecast of $3.90 to $4.05, which could miss analyst estimates of $4.01.

From the press release:

Paul Raines, chief executive officer, stated, “As expected, the continued growth and increased profit contribution of our non-physical gaming businesses drove our second quarter results. Tech Brands sales grew more than 50%, omni-channel sales increased 16%, Collectibles sales more than doubled and year-to-date, more than half of GameStop’s operating earnings have come from non-physical gaming categories. These new businesses offset a tough quarter for video gaming and prove that our diversification strategy is succeeding.”

GME-2016-08-25

GameStop shares were down more than 7% in after hours trading. Prior to today’s report, GME had gained 14.7% year-to-date, doubling the return of the S&P 500 during the same period.

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