GameStop Shares Plunge After Disappointing Report

GameStop (NYSE:GME) revealed some disappointing news in its latest earnings report. The company’s net income plunged roughly 78 percent year-over-year for the first quarter of 2019. Adjusted earnings per share were just $0.07, down from $0.30 in the prior-year period.

The video game retailer also reported that its first-quarter revenue missed expectations. GameStop’s revenue was $1.55 billion in the first quarter, down 13.3 percent year-over-year. The company reported revenue of $1.8 billion in the same period last year.  

Some of the decline was blamed on a steep sales drop on gaming consoles. Hardware sales fell by 35 percent for the quarter. Many consumers are waiting for the next generation of PlayStation and Xbox consoles, which are expected to launch next year. Two of the current major consoles, the PlayStation 4 and Xbox One, were released back in 2013, and nearly everyone willing to buy one already has one.  

Sales of pre-owned games declined by more than 20 percent in the first quarter, according to the earnings report. Two trends contributed to this decline. The first is the trend towards downloading video games over the Web rather than buying them as discs. The second is the explosion of online and mobile games played on smartphones, tablets and Web browsers. Both trends have considerably reduced the share of consumers that have physical games to trade in and the number of customers who want to buy them.

For the future, GameStop said it expects total sales to fall from 5 to 10 percent during fiscal 2019. To save money, the company is eliminating the quarterly dividend paid to investors. The roughly $157 million a year saved will be used to pay down debt and invest in initiatives.

Shares of the video game retailer cratered after the news. GameStop shares closed down roughly 36 percent. It was the lowest close since 2003 and its biggest one-day percentage loss since its listing in 2002.

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