GME GameStop Corp Holding Company

GameStop Inc. reported an 11% drop in earnings in the latest quarter and provided a lackluster profit outlook, as the videogame retailer races to keep pace in an increasingly digital market in which games are downloaded.

Signs of struggle in its legacy business were visible in the latest three-month period ended April 30. New videogame software sales fell 7.6%, while sales of preowned and value games slipped 3.7%. Together, the two categories account for 58% of total sales.

New videogame hardware sales also dropped 28.8%, though sales of virtual-reality headsets or any new game-console releases could help offset the sag in upcoming quarters.

The company's mobile and consumer electronics category, which GameStop hopes will grow to offset losses linked to game-disks sales, rose a robust 40%, but the category made up just under 10% of total sales.

Shares of the company, down about 25% over the past year, dropped more than 8% to $27.55 in after-hours trading.

For the current quarter, the company said it expects same-store sales to fall between 4% and 7% with earnings on a per-share basis between 23 cents and 30 cents. Analysts surveyed by Thomson Reuters expected earnings of 33 cents.

The company has been trying to become less dependent on its legacy videogame business. The retailer in the past fiscal year reduced its videogame store count by 125 locations but expanded by 553 stores its Technology Brands segment, which sells mobile phones and other electronics.

Company executives have said they would likely keep closing GameStop locations at a 2% rate. But the transition is a work in progress with electronics comprising only a fraction of total sales for the foreseeable future.

Over all, for the latest quarter, GameStop reported a profit of $65.8 million, or 63 cents a share, compared with a year-earlier profit of $73.8 million, or 68 cents a share. Excluding certain items, profit per share sagged to 66 cents from 68 cents a year earlier.

Revenue slipped 4.3% to $1.97 billion. The Grapevine, Texas, company had said overall sales would fall between 4% and 7% in the latest quarter.

Same-store sales fell 6.2%, better than the company's estimate for a decline between 7% and 9%. The decline was more accelerated in the U.S., where same-store sales slipped 6.6%, compared with a 4.9% slide internationally.

Analysts surveyed by Thomson Reuters had expected earnings of 62 cents a share and revenue of $1.97 billion.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

May 26, 2016 17:45 ET (21:45 GMT)

GameStop (NYSE:GME)
Historical Stock Chart
From Mar 2024 to Apr 2024

GameStop (NYSE:GME)
Historical Stock Chart
From Apr 2023 to Apr 2024