Bloomberg News

GameStop to Cut Store Number by 2% as Forecast Falls Short (1)

March 27, 2014

GameStop Corp. (GME:US) forecast full-year profit that trailed analysts’ estimates and said it will cut the number of its video-game stores by about 2 percent after last quarter’s sales fell short.

The retailer predicted 2014 earnings of $3.40 to $3.70 a share, compared with the $3.76 average of estimates compiled by Bloomberg. Fourth-quarter sales rose 3.4 percent to $3.68 billion, according to a statement, while analysts anticipated $3.79 billion. The shares (GME:US) declined as much as 8.7 percent.

The Grapevine, Texas-based company is depending on new generation machines from Sony Corp. and Microsoft Corp. (MSFT:US) to breathe new life into an industry hurt by consumers shifting play to social networks and mobile phones. GameStop, which has about 6,400 stores in its video-game brands segments in the U.S., Canada, Australia and Europe, lowered its forecast for fourth-quarter profit in January because of disappointing sales of titles and reduced profit margin on consoles in the holidays.

The stock dropped 7.2 percent to $36.10 at 10:02 a.m. in New York. Through yesterday, the shares had slumped 21 percent this year, while the Standard & Poor’s 500 Index gained 0.2 percent.

GameStop executives said in January that a higher percentage of sales in the hardware category, driven by demand for Sony’s PlayStation 4 and Microsoft’s Xbox One, would result in lower profit margins.

The retail, which generates profit from software sales and from buying used games and consoles and reselling them for a markup, is facing rising competition from rivals both online and in stores. Sony said in January it would test a video-game streaming service, and Wal-Mart Stores Inc. said this month it will begin offering store credit for used video games.

GameStop’s net income fell 16 percent to $220.5 million, or $1.89 a share, in fiscal fourth quarter ended Feb. 1, from $261.1 million, or $2.15, a year earlier. Analysts estimated $1.93 on average.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Cecile Daur, John Lear


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Companies Mentioned

  • GME
    (GameStop Corp)
    • $40.71 USD
    • 0.05
    • 0.12%
  • MSFT
    (Microsoft Corp)
    • $44.88 USD
    • 0.80
    • 1.78%
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