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GameStop Likely to Put Up a Dismal Show in Q1, Stock Down
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GameStop Corp. (GME - Free Report) came out with its first-quarter fiscal 2020 preliminary results. The video game retailer forecasts 33-35% year-over-year decline in global sales. Further, comparable store sales (comps) are anticipated to decline nearly 30-31% in the quarter under review. In fact, excluding the impact of stores that were closed due to the coronavirus pandemic, comps are envisioned to fall 16-17%.
We note that GameStop’s shares were down 8.3% during after-market hours on Jun 4. Again, this Zacks Rank #3 (Hold) stock has dropped 26.4% year to date compared with the industry’s decline of 21.9%.
The company bore the brunt of temporary store closures which were undertaken to check the spread of the outbreak. Notably, GameStop had shut all its U.S stores, a total of 3,526, effective Mar 22. Markedly, nearly 65% of stores were providing limited curbside pickup in the region. Along with this, nearly 76% of the company’s stores in various international markets were also shuttered in March.
Even in the last six weeks of the fiscal first quarter almost 48% stores were completely non-operational globally. Nevertheless, nearly 10% of its stores worldwide were operational, while roughly 42% stores were offering limited curbside delivery option. Additionally, all stores in Australia remained open through the fiscal first quarter, which offered some respite to GameStop. Notably, higher demand stemming from the region resulted in comps growth of 35%.
More on Headlines
Moving on, management projects adjusted EBITDA loss within $79.1-$74.2 million range during the fiscal first quarter. Notably, GameStop had reported adjusted EBITDA of $42.7 million in the year-ago period. Moreover, the company expects net loss in the band of nearly $171.8-$161.9 million in the to-be-reported quarter against net income of nearly $6.8 million in first-quarter fiscal 2019.
Further, inventory at the end of the quarter is likely to decline almost 43% to about $650 million. Nevertheless, cash flow used in operations during the quarter is envisioned to be nearly $49 million, down from $665 million used in the prior-year quarter. The improvement can be attributed to GameStop’s efforts to enhance its cash conversion cycle and maintain a favorable inventory position.
Apart from these, GameStop is optimistic about its financial liquidly despite the coronavirus-induced crisis. In this regard, the company had total cash of nearly $570 million as of May 2, 2020, including $135 million drawn under revolving credit facility. By the end of second-quarter fiscal 2020, management envisions nearly $575-$625 million as total cash and liquidity on the back of its efficient working capital management efforts. As of Jun 3, the company had lowered its outstanding borrowings under revolving facility to approximately $100 million.
Store Reopening On Track
With restrictions to check the coronavirus outbreak being lifted, GameStop is reopening its stores globally. In this regard, almost 85% of the company’s stores located in the United Sates were reopened by the end of May for limited customer access or curbside delivery. Meanwhile, 90% of the company’s stores were operational once again in international markets.
However, in the wake of the recent civil unrest in the United States the company had to close almost 90 stores that were earlier reopened. Out of these, management expects 30 outlets to be closed for the foreseeable future due to severe damage.
Undoubtedly, GameStop is committed to containing costs, optimizing inventory and expanding high margin product categories. The company has also been focusing on enhancing store experience, expanding and redesigning PowerUp Rewards loyalty program, augmenting digital capabilities and improving engagement with vendors and partners. Further, it has been augmenting omni-channel features such as “Buy Online Pick Up In Store.”
Big Lots (BIG - Free Report) has a long-term earnings growth rate of 6.6% and a Zacks Rank #1.
The Lovesac Company (LOVE - Free Report) has a long-term earnings growth rate of 35% and a Zacks Rank #2 (Buy).
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GameStop Likely to Put Up a Dismal Show in Q1, Stock Down
GameStop Corp. (GME - Free Report) came out with its first-quarter fiscal 2020 preliminary results. The video game retailer forecasts 33-35% year-over-year decline in global sales. Further, comparable store sales (comps) are anticipated to decline nearly 30-31% in the quarter under review. In fact, excluding the impact of stores that were closed due to the coronavirus pandemic, comps are envisioned to fall 16-17%.
We note that GameStop’s shares were down 8.3% during after-market hours on Jun 4. Again, this Zacks Rank #3 (Hold) stock has dropped 26.4% year to date compared with the industry’s decline of 21.9%.
The company bore the brunt of temporary store closures which were undertaken to check the spread of the outbreak. Notably, GameStop had shut all its U.S stores, a total of 3,526, effective Mar 22. Markedly, nearly 65% of stores were providing limited curbside pickup in the region. Along with this, nearly 76% of the company’s stores in various international markets were also shuttered in March.
Even in the last six weeks of the fiscal first quarter almost 48% stores were completely non-operational globally. Nevertheless, nearly 10% of its stores worldwide were operational, while roughly 42% stores were offering limited curbside delivery option. Additionally, all stores in Australia remained open through the fiscal first quarter, which offered some respite to GameStop. Notably, higher demand stemming from the region resulted in comps growth of 35%.
More on Headlines
Moving on, management projects adjusted EBITDA loss within $79.1-$74.2 million range during the fiscal first quarter. Notably, GameStop had reported adjusted EBITDA of $42.7 million in the year-ago period. Moreover, the company expects net loss in the band of nearly $171.8-$161.9 million in the to-be-reported quarter against net income of nearly $6.8 million in first-quarter fiscal 2019.
Further, inventory at the end of the quarter is likely to decline almost 43% to about $650 million. Nevertheless, cash flow used in operations during the quarter is envisioned to be nearly $49 million, down from $665 million used in the prior-year quarter. The improvement can be attributed to GameStop’s efforts to enhance its cash conversion cycle and maintain a favorable inventory position.
Apart from these, GameStop is optimistic about its financial liquidly despite the coronavirus-induced crisis. In this regard, the company had total cash of nearly $570 million as of May 2, 2020, including $135 million drawn under revolving credit facility. By the end of second-quarter fiscal 2020, management envisions nearly $575-$625 million as total cash and liquidity on the back of its efficient working capital management efforts. As of Jun 3, the company had lowered its outstanding borrowings under revolving facility to approximately $100 million.
Store Reopening On Track
With restrictions to check the coronavirus outbreak being lifted, GameStop is reopening its stores globally. In this regard, almost 85% of the company’s stores located in the United Sates were reopened by the end of May for limited customer access or curbside delivery. Meanwhile, 90% of the company’s stores were operational once again in international markets.
However, in the wake of the recent civil unrest in the United States the company had to close almost 90 stores that were earlier reopened. Out of these, management expects 30 outlets to be closed for the foreseeable future due to severe damage.
Undoubtedly, GameStop is committed to containing costs, optimizing inventory and expanding high margin product categories. The company has also been focusing on enhancing store experience, expanding and redesigning PowerUp Rewards loyalty program, augmenting digital capabilities and improving engagement with vendors and partners. Further, it has been augmenting omni-channel features such as “Buy Online Pick Up In Store.”
Some Solid Retail Bets
Dollar General (DG - Free Report) has a long-term earnings growth rate of 12.4%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Big Lots (BIG - Free Report) has a long-term earnings growth rate of 6.6% and a Zacks Rank #1.
The Lovesac Company (LOVE - Free Report) has a long-term earnings growth rate of 35% and a Zacks Rank #2 (Buy).
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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