How GameStop Comps and Guidance Shot Down Solid Earnings

GameStop Corp. (NYSE: GME) reported its fiscal first-quarter financial results after the markets closed on Thursday. The company said it had $0.66 in earnings per share (EPS) on $1.97 billion in revenue. The consensus estimates had called for EPS of $0.61 and revenue of $1.95 billion. In the same period of last year, the company reported $0.68 in EPS on $2.06 billion in revenue.

For this quarter, same-store sales held back this video game retailer by dropping 6.2%, down 6.6% in the United States and down 4.9% internationally. Last year’s same-store sales increased 8.6% for this same period.

Collectibles sales rose over 250%, driven by the addition of ThinkGeek.com and assorted sales of Five Nights at Freddy’s products, Pokemon trading cards and Minecraft toys in GameStop branded stores. The company added two Collectibles stores during the quarter, bringing the total global portfolio to 37 stores.

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In terms of guidance for the second quarter, the company expects EPS to be in the range of $0.23 to $0.30 and for comparable sales to decrease by 4% to 7%. Consensus estimates are $0.33 in EPS on $1.80 billion in revenue.

Paul Raines, CEO of GameStop, commented:

We exceeded our first quarter same store sales and EPS guidance in a challenging retail environment due to the outperformance of our non-physical gaming businesses (Technology Brands, Collectibles, Digital). Their contributions demonstrate the value of our diversification strategy as 42% of operating earnings came from non-physical gaming. We expect these trends to continue in the second quarter as digital receipts continue to grow, Technology Brands store base continues to mature and Collectibles sales continue to expand.

On the books, GameStop cash and cash equivalents totaled $473.6 million at the end of the quarter, compared to $369.8 million in the same period from last year.

Shares of GameStop were last seen down 6% at $28.16 on Friday, with a consensus analyst price target of $36.23 and a 52-week trading range of $24.33 to $47.83.

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