GameStop Corp. boosts vacation forecast after strong third-quarter results – The Motley Fool


GameStop (NYSE: GME) investors had been preparing for bad news from the video game retailer in their last quarterly report before the mandatory holiday shopping season. However, while the company had problems with lower profitability and a surprise drop in sales of technology for the consumer, its broader business performed well. GameStop recorded healthy growth and improved its sales outlook due to the creation of momentum around the new releases of the game console.

More about that optimistic forecast in a moment. First, this is how the main numbers accumulated against the previous year's period:


Q3 2017

Q3 2016

Year-on-year change


$ 1.99 billion [19659009] ] $ 1.96 billion


Net income

$ 59.4 million

$ 50.8 million


Earnings per share

$ 0.59

$ 0.49 [19659009] 20%

Data source: GameStop.

What happened this quarter?

Sales increased for the third consecutive quarter, while reported earnings increased thanks to a single tax benefit. After adjusting for that unusual rebate, GameStop's profitability worsened slightly as its sales mix shifted to lower margin products such as Nintendo Switch.

  Two boys play a console video game.

Image source: Getty Images.

The highlights of the quarter include:

  • The growth of comparable sales was 1.9%, or approximately the same modest pace that GameStop achieved in each of the last two quarters.
  • The video game segments led the way, with new software sales that increased to $ 650 million from $ 617 million a year ago. The game hardware expanded by 9% to $ 310 million. GameStop benefited from strong demand for the new Nintendo game device and a series of popular video game releases.
  • The consumer technology segment missed management's goals due to a later release than expected from Apple after the iPhone X. On the other hand, GameStop's consumables division grew by 27 % to maintain the rhythm of a fiscal year of approximately $ 675 million.
  • The gross profit margin fell to 34.7% of sales of 36.1% due to a changing sales mix. Two of GameStop's most profitable divisions, consumer technology and used games, contracted while its less profitable segment, the new gaming hardware, experienced the highest growth.
  • The net profit margin expanded to 3% of sales from 2.6% thanks to a single fiscal benefit.

What the administration had to say

The executives explained that the new hardware and software of video games made the difference for the growth of sales this quarter. "Our results were driven by strong software demand and continued momentum for Nintendo Switch and collectibles," interim CEO Dan Dematteo said.

Earnings were delayed, which contributed to a 23% drop in profits in the consumer electronics segment. . "Our technology brands The business of AT & T Wireless exceeded our expectations for the third quarter," the executives said, due to the "post-expected launch of Apple's iPhone X".

Looking ahead

Dematteo and his team believe that the supply of that smartphone in the coming weeks will determine whether the technology brands segment will achieve its sales goals aggressive for the year. However, the prospects for the central gaming segment are clearer and better thanks to the excitement surrounding new consoles such as the Xbox One X and the major game releases that include Activision Blizzard [194590004] Call of Duty: WWII [ad_2]
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