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Gamestop Corporation (GME - Free Report) continues to see a decline in same-store sales as sales of physical video games slide. This Zacks Rank #5 (Strong Buy) is closing 150 stores as it tries to cope.
GameStop operates more than 7,500 stores across 14 countries as well as several websites, including gamestop.com, and gamer magazines and publications.
Its Technology Brands segments includes 1,522 Simply Mac, Spring Mobile AT&T and Cricket stores.
Terrible Holiday Quarter Results
On Mar 23, GameStop reported its fourth quarter and fiscal 2016 results. It actually beat on the Zacks Consensus Estimate by 9 cents, reporting $2.38 versus the Consensus of $2.29.
But that really wasn't the full story.
The video game business continued to be weak. Total global sales fell 13.6% to $3.05 billion, while comparable store sales declined 16.3%.
They were even worse in the US, as they fell 20.8%, while falling just 4.6% internationally.
The quarter was significantly impacted by weak sales of certain AAA titles and aggressive console promotions by other retailers on Black Friday. New hardware sales fell 29.1% and new software sales sank 19.3%.
Additionally, consumer tastes are simply changing as more games are being sold digitally versus at the stores.
Similarly to what happened to video stores, once you can stream a game or just download it, why would you need to buy the physical game?
Eventually, most gaming analysts believe that ALL video games will be sold online.
Closing 150 Stores
In response to some of the weakness in the physical games, GameStop announced it was closing 150 stores. But with over 7,500, that's really a drop in the bucket.
The company has plans to focus on growth in its Technology Brands division, but this is a really small fraction of overall revenue. In the fourth quarter it was just $256 million.
Weak 2017 Guidance Leads to Estimate Cuts
GameStop announced that it would no longer give quarterly EPS or same-store sales guidance, saying it wants to focus on longer-term guidance like full year results.
It provided a 2017 outlook which gave a range for total sales of a decline of 2% to a gain of 2%.
GameStop also sees comparable store sales still weak, giving a range of -5% to 0.0%.
Earnings are seen in the range of $3.10 to $3.40, which was under consensus. As a result, the analysts have been cutting 2017 estimates.
The Zacks Consensus Estimate for fiscal 2017 has sunk to $3.25 from $3.90 in the last 90 days. That's an earnings decline of 13.7% as the company earned $3.77 last year.
Shares Sink
Not surprisingly, shares have sunk to nearly 3 year lows.
They are, actually, cheap, with a forward P/E of just 6.7.
But the video game industry is changing. It's always risky for investors to be in industries with technology disruptions.
If you want to invest in gaming, you may want to consider Best Buy (BBY - Free Report) or even Microsoft (MSFT - Free Report) , instead. Best Buy is a Zacks Rank #1 (Strong Buy) and Microsoft is a #3 (Hold).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
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Bear of the Day: Gamestop (GME)
Gamestop Corporation (GME - Free Report) continues to see a decline in same-store sales as sales of physical video games slide. This Zacks Rank #5 (Strong Buy) is closing 150 stores as it tries to cope.
GameStop operates more than 7,500 stores across 14 countries as well as several websites, including gamestop.com, and gamer magazines and publications.
Its Technology Brands segments includes 1,522 Simply Mac, Spring Mobile AT&T and Cricket stores.
Terrible Holiday Quarter Results
On Mar 23, GameStop reported its fourth quarter and fiscal 2016 results. It actually beat on the Zacks Consensus Estimate by 9 cents, reporting $2.38 versus the Consensus of $2.29.
But that really wasn't the full story.
The video game business continued to be weak. Total global sales fell 13.6% to $3.05 billion, while comparable store sales declined 16.3%.
They were even worse in the US, as they fell 20.8%, while falling just 4.6% internationally.
The quarter was significantly impacted by weak sales of certain AAA titles and aggressive console promotions by other retailers on Black Friday. New hardware sales fell 29.1% and new software sales sank 19.3%.
Additionally, consumer tastes are simply changing as more games are being sold digitally versus at the stores.
Similarly to what happened to video stores, once you can stream a game or just download it, why would you need to buy the physical game?
Eventually, most gaming analysts believe that ALL video games will be sold online.
Closing 150 Stores
In response to some of the weakness in the physical games, GameStop announced it was closing 150 stores. But with over 7,500, that's really a drop in the bucket.
The company has plans to focus on growth in its Technology Brands division, but this is a really small fraction of overall revenue. In the fourth quarter it was just $256 million.
Weak 2017 Guidance Leads to Estimate Cuts
GameStop announced that it would no longer give quarterly EPS or same-store sales guidance, saying it wants to focus on longer-term guidance like full year results.
It provided a 2017 outlook which gave a range for total sales of a decline of 2% to a gain of 2%.
GameStop also sees comparable store sales still weak, giving a range of -5% to 0.0%.
Earnings are seen in the range of $3.10 to $3.40, which was under consensus. As a result, the analysts have been cutting 2017 estimates.
The Zacks Consensus Estimate for fiscal 2017 has sunk to $3.25 from $3.90 in the last 90 days. That's an earnings decline of 13.7% as the company earned $3.77 last year.
Shares Sink
Not surprisingly, shares have sunk to nearly 3 year lows.
They are, actually, cheap, with a forward P/E of just 6.7.
But the video game industry is changing. It's always risky for investors to be in industries with technology disruptions.
If you want to invest in gaming, you may want to consider Best Buy (BBY - Free Report) or even Microsoft (MSFT - Free Report) , instead. Best Buy is a Zacks Rank #1 (Strong Buy) and Microsoft is a #3 (Hold).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>