June 5 (Reuters) - GameStop Corp’s shares plunged 35% and were set for their worst day ever following the retailer’s weaker-than-expected quarterly revenue and dividend halt, as it continues to struggle with a changing video game landscape and emerging technologies like game-streaming.
Chief Financial Officer Rob Lloyd said consumers were postponing their console purchases as they awaited new versions of PS4 and Xbox One. The current models from Sony Corp and Microsoft Corp are in their late stages.
The Grapevine, Texas-based retailer lost $280 million in market capitalization on Wednesday.
“Overall, the combination of the transformation initiatives, ongoing consumer shift to digital gaming, and current console cycle being in the very late stages are likely to make 2019 a very challenging year for GameStop,” Telsey Advisory Group analysts wrote in a note.
At least 5 brokerages cut their price targets on the stock.
The gaming retailer has been struggling with shrinking profits as consumers shift to downloadable videogames instead of buying physical versions from stores and has seen a slew of management changes after its Chief Executive Officer J. Paul Raines passed away last year.
GameStop also faces a major threat from game streaming, with technology giants like Alphabet Inc’s Google, Microsoft and others getting into the still nascent space.
Benchmark analysts said the latest management team “iteration was uninspiring and lacked any coherent articulation of a tangible vision on how to transform the business.”
“The only impactful transformation we see in GameStop’s future is the industry’s on-going transition to the digital economy, a viable scenario where GameStop has little value.”
The company said its dividend stoppage will save about $157 million per year, besides helping in cutting its debt of nearly $500 million.
Credit Suisse analysts said the dividend elimination was not entirely surprising, but acknowledged that the move to pay down debt is prudent.
“That said, the implication that dollars may be reallocated to transformation initiatives, adds risk at a time when gross profit is already declining. Where that shakes out for 2020 will be key,” CS analysts said.
GameStop’s shares were trading at $5.08 on the New York Stock Exchange. (Reporting by Arjun Panchadar in Bengaluru; Editing by Shailesh Kuber)