November 29, 2018 / 10:23 PM / 16 days ago

GameStop cuts full-year profit forecast, shares fall 11 percent

(Reuters) - GameStop Corp cut its full-year adjusted profit forecast, as the world’s largest video game retailer struggles with weakness in used games from developers launching streaming services of old titles, sending its shares down 11.3 percent.

GameStope gift cards are shown for sale at a GameStop Inc. store in Encinitas, California, U.S., May 24, 2017. REUTERS/Mike Blake

The company, which is exploring a potential transaction after receiving a buyout interest, last week said it would sell its Spring Mobile business to Prime Communications LP for $700 million.

“We are evaluating all aspects of our business, including our store and omni-channel experience, cost structure, strategic and economic partnerships ...,” Chief Financial Officer Robert Lloyd said in a statement on Thursday.

The company is unlikely to name a new chief executive officer until the board’s strategic review ends, Shane Kim, who has been the interim chief executive officer since May, said on a post-earnings call.

The Grapevine, Texas-based company said it now expects full-year adjusted profit to range between $2.55 and $2.75 per share, down from $3.00 to $3.35 earlier.

The pre-owned or used-game market has been challenged as companies including Electronic Arts Inc, Sony Corp and Microsoft Corp have each launched plans to offer monthly streaming services for many of the older titles they own.

Sales of pre-owned products fell 13.4 percent to $396.9 million in GameStop’s third quarter, while the technology brands business reported about 12 percent drop to $171.1 million.

But, sales in the company’s hardware business increased 12.8 percent to $349 million, while sales in its video game retail business rose about 11 percent to $720.7 million.

The growth was mostly driven by higher demand for Xbox One X and Sony PS4 and big game launches by Activision Blizzard Inc and Take Two Interactive Software Inc such as “Call of Duty: Black Ops 4” and the much-awaited “Red Dead Redemption 2”.

GameStop reported a net loss of $488.6 million, or $4.78 per share, in the three months ended Nov.3, compared with a year-ago profit of $59.4 million, or 59 cents per share. The reported quarter included a goodwill impairment charge of $557.3 million.

Excluding items, GameStop earned 67 cents per share, while net sales rose 4.8 percent to $2.08 billion.

Analysts on average had expected a profit of 57 cents per share and revenue of $2.03 billion, according to IBES data from Refinitiv.

GameStop’s shares were down 11 percent at $13.04 after the bell on Thursday.

Reporting by Arjun Panchadar and Laharee Chatterjee in Bengaluru; Editing by Sriraj Kalluvila

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