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GameStop (GME) Tops Q1 Earnings, Falls on Weak Guidance
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GameStop Corp. (GME - Free Report) reported better-than-expected financial numbers for the first quarter of fiscal 2016. On the one hand adjusted earnings per share of 66 cents beat the Zacks Consensus Estimate of 61 cents, while on the other hand net sales of $1,971.5 million came in above the Zacks Consensus Estimate of $1,952 million.
Despite better-than-expected fiscal first-quarter results the company’s shares fell more than 8% in after-hour trading session on May 26 on the company’s lackluster guidance for the fiscal second quarter. We also observed that adjusted earnings per share decreased 2.9%, whereas net sales declined 4.3% year over year during the quarter under review. The decrease in video games sales resulted in the year-over-year deterioration.
Consolidated comparable-store sales (comps) dipped 6.2%, reflecting comps decline of 6.6% at domestic locations and 4.9% at international locations. By sales mix, new video game hardware sales plunged 28.8% to $312.9 million, whereas new video game software sales fell 7.8% to $567.2 million.
The Mobile and Consumer Electronics category showed strength with sales surging 40.7% to $192.6 million. Video Game Accessories sales too displayed 8.1% growth to $162.7 million.
However, Pre-owned and Value Video Game Products category’s sales declined 3.7% year over year to $560.9 million. Nonetheless, an increase in DLC for The Division and POSA sales drove 16.6% growth in adjusted digital receipts to $259 million.
The Technology Brands segment reported revenue growth of 62.2% $165.8 million. In the reported quarter, the company added 18 net Technology Brand stores. This segment is expected to sustain its growth momentum on the back of its collaboration with AT&T, Inc. (T - Free Report) and Apple Inc. (AAPL - Free Report) .
During the reported quarter, gross profit climbed 5.7% to $675.5 million, while gross margin expanded 330 basis points to 34.3%. Rapid growth across the digital, mobile and collectibles categories backed the improvement.
Other Financial Aspects
GameStop ended the quarter with cash and cash equivalents of $473.6 million, net receivables of $139 million, and shareholders’ equity of $2,156.1 million.
The company did not repurchase any shares in the reported quarter. However, the company intends to buy back between $75 million and $125 million of shares in fiscal 2016.
The company declared a quarterly cash dividend of 37 cents per share, which is payable on Jun 21 to shareholders as of close of business on Jun 8, 2016.
Guidance
The company reiterated its fiscal 2016 comps and earnings guidance. Comps are expected between negative 3% and 0%.
For the fiscal second quarter, management projects sales to decline in the range of negative 1–4%, and comps decline in the band of 4–7%.
The company envisions earnings in the range of $3.90–$4.05 per share for fiscal 2016 and between 23 cents and 30 cents for the fiscal second quarter.
The current Zacks Consensus Estimate for the fiscal second quarter and fiscal 2016 stands at 34 cents per share and $4.01 per share, respectively. However, the fiscal second-quarter estimate may witness downward estimate revisions in the coming days.
Zacks Rank
At present, GameStop carries a Zacks Rank #4 (Sell). A better-ranked stock in the retail sector is The Children's Place, Inc. (PLCE - Free Report) , which sports a Zacks Rank #1 (Strong Buy).
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GameStop (GME) Tops Q1 Earnings, Falls on Weak Guidance
GameStop Corp. (GME - Free Report) reported better-than-expected financial numbers for the first quarter of fiscal 2016. On the one hand adjusted earnings per share of 66 cents beat the Zacks Consensus Estimate of 61 cents, while on the other hand net sales of $1,971.5 million came in above the Zacks Consensus Estimate of $1,952 million.
Despite better-than-expected fiscal first-quarter results the company’s shares fell more than 8% in after-hour trading session on May 26 on the company’s lackluster guidance for the fiscal second quarter. We also observed that adjusted earnings per share decreased 2.9%, whereas net sales declined 4.3% year over year during the quarter under review. The decrease in video games sales resulted in the year-over-year deterioration.
Consolidated comparable-store sales (comps) dipped 6.2%, reflecting comps decline of 6.6% at domestic locations and 4.9% at international locations. By sales mix, new video game hardware sales plunged 28.8% to $312.9 million, whereas new video game software sales fell 7.8% to $567.2 million.
The Mobile and Consumer Electronics category showed strength with sales surging 40.7% to $192.6 million. Video Game Accessories sales too displayed 8.1% growth to $162.7 million.
However, Pre-owned and Value Video Game Products category’s sales declined 3.7% year over year to $560.9 million. Nonetheless, an increase in DLC for The Division and POSA sales drove 16.6% growth in adjusted digital receipts to $259 million.
The Technology Brands segment reported revenue growth of 62.2% $165.8 million. In the reported quarter, the company added 18 net Technology Brand stores. This segment is expected to sustain its growth momentum on the back of its collaboration with AT&T, Inc. (T - Free Report) and Apple Inc. (AAPL - Free Report) .
During the reported quarter, gross profit climbed 5.7% to $675.5 million, while gross margin expanded 330 basis points to 34.3%. Rapid growth across the digital, mobile and collectibles categories backed the improvement.
Other Financial Aspects
GameStop ended the quarter with cash and cash equivalents of $473.6 million, net receivables of $139 million, and shareholders’ equity of $2,156.1 million.
The company did not repurchase any shares in the reported quarter. However, the company intends to buy back between $75 million and $125 million of shares in fiscal 2016.
The company declared a quarterly cash dividend of 37 cents per share, which is payable on Jun 21 to shareholders as of close of business on Jun 8, 2016.
Guidance
The company reiterated its fiscal 2016 comps and earnings guidance. Comps are expected between negative 3% and 0%.
For the fiscal second quarter, management projects sales to decline in the range of negative 1–4%, and comps decline in the band of 4–7%.
The company envisions earnings in the range of $3.90–$4.05 per share for fiscal 2016 and between 23 cents and 30 cents for the fiscal second quarter.
The current Zacks Consensus Estimate for the fiscal second quarter and fiscal 2016 stands at 34 cents per share and $4.01 per share, respectively. However, the fiscal second-quarter estimate may witness downward estimate revisions in the coming days.
Zacks Rank
At present, GameStop carries a Zacks Rank #4 (Sell). A better-ranked stock in the retail sector is The Children's Place, Inc. (PLCE - Free Report) , which sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>