GameStop forecast falls far short of predictions
EB Games retailer losing business as gamers buy more titles online
GameStop Corp., which owns EB Games, fell as much as 22 per cent after the struggling video-game retailer posted a wider second-quarter loss and issued a forecast that was far below analysts’ estimates.
Comparable-store sales, a key measure of performance, will slump in the low teens this year, GameStop said Tuesday, more than an earlier forecast of 5 per cent to 10 per cent.
Shares of GameStop plunged as low as $3.97 (U.S.) in New York trading Wednesday, close to the low they hit in extended trading after the report Tuesday. Even after a recent rally, the stock was down 60 per cent this year through Tuesday’s close.
The retailer has lost business as gamers increasingly purchase titles online, and the once-lucrative business of selling used titles dried up. This year, the company forecasts profit of $1.15 to $1.30 a share, excluding some items. That compares with Wall Street estimates of $1.57.
Last year, GameStop’s board reversed course on a decision to diversify into mobile-phone sales, unloading a chain of stores for $700 million. The company’s new chief executive officer, George Sherman, has promised to refocus on the core video-game business through such steps as redesigning the website and sponsoring esports events in stores. He joined the company in April.
GameStop eliminated its dividend in June and renewed its focus on cost controls. Savings from expense reductions could add as much as $200 million annually, twice original projections, GameStop said. The company eliminated 14 per cent of its corporate staff last month.
Management has sought to bolster the stock through share repurchases, including a tender for 12 million shares in July at $5.20 each. The Grapevine, Texas-based retailer said it has about $237 million left under its buyback authorization.