GameStop Tumbles After Forecast Falls Short for Quarterby
Company sees 23 cents to 30 cents; analysts forecast 33
CEO cites typically slow period, reaffirms full-year outlook
GameStop Corp., the video-game retailer expanding into mobile phones, fell the most since January after the company’s forecast for the current quarter fell short of analysts’ projections.
Fiscal second-quarter profit excluding some items will be 23 cents to 30 cents a share, the Grapevine, Texas-based company said Thursday in a statement. Comparable store sales are expected to decline by 4 percent to 7 percent. Analysts were projecting earnings of 33 cents, the average of 14 estimates, and revenue of $1.8 billion.
The second quarter is typically the slowest for new video-game releases, according to the company. GameStop is continuing its transition into a retailer of AT&T Inc.-branded mobile phones and services, while emphasizing digital downloads and accessories sales in games.
“Investors may take a wait-and-see approach to the ongoing transition in the GameStop business and there will be some volatility in GME shares as the Street adjusts to a change in focus metrics,” Michael Olson, a Piper Jaffray Cos. analyst, wrote in a note on Friday. He has an overweight rating on the stock, the equivalent of a buy recommendation.
GameStop tumbled 6.2 percent to $28.12 at 11:49 a.m. in New York and lost as much as 7.8 percent, the biggest intraday decline since Jan. 12, after the company’s financial results and outlook were announced. It had been up 6.9 percent this year.
The company reaffirmed its full-year profit forecast of $3.90 to $4.05 a share and said comparable store sales would range from unchanged to down 3 percent, with Chief Executive Officer Paul Raines saying the company’s transformation is succeeding.
“We’re getting beat up a bit for our guidance,” Raines said in a telephone interview. “We tend to low-ball our estimates.”
First-quarter profit, excluding items, fell 7.3 percent to $68.4 million, or 66 cents a share, from $73.8 million, or 68 cents, a year earlier. That beat the 62-cent average of analysts’ estimates compiled by Bloomberg. Sales, down 4.3 percent to $1.97 billion in the period ended April 30, also topped projections.