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GameStop's Holiday Sales Remain Soft Despite Comps Growth

GameStop Corp. GME reported sales numbers for the nine-week holiday period (ended Jan 5, 2019). While total global sales decreased, the company posted total comparable store sales (comps) growth. Meanwhile, management reiterated its earnings guidance for fiscal 2018. As a result, shares of this video game retailer rose by 1% during the trading session on Jan 18.

In the past month, shares of this Grapevine, TX-based company have gained 36.5%, outperforming the industry’s 21.8% growth.



Let’s Take a Close Look

GameStop generated total global sales of $2.63 billion, down 5% year over year. Comps for the holiday period grew 1.5%, reflecting a 3.6% growth in the United States offset by a 3.1% decline internationally. Per management, sturdy comps were driven by robust sales in collectibles, accessories, and digital.

The company noted that sales were hurt by a shift in its fiscal calendar for the 53rd week in fiscal 2017 and the Call of Duty launch timing. However, comps gained from these as the calendar shift and timing effects are not included in comps calculations.

New hardware sales slipped 6.1% on positive Xbox One X launch during the 2017 holiday period, offset by robust demand for the Nintendo Switch. Also, new video game software sales declined 7.3% primarily due to Activision’s Call of Duty: Black Ops 4 which released in October last year compared to Call of Duty: WWII release in November 2017. Pre-owned sales fell 16.4%, while video games accessories sales advanced 28.7%.

Now let’s take a look at non-physical gaming business performance during the holiday period.

Collectibles sales improved 3.7% to $219.2 million. Digital sales surged 16.8% to $352.9 million on account of sales of digital currency. However, Technology Brands revenues declined 19.3% due to decrease in store traffic and store count.

Outlook

Management reiterated its earnings guidance of $2.55-$2.75 per share for fiscal 2018. However, comps are expected to remain flat for the fiscal year. The Zacks Consensus Estimate for fiscal 2018 is pegged at $2.71.

Recently, GameStop concluded the sale of the Spring Mobile business. The company now expects the Spring Mobile business to generate adjusted operating earnings of roughly $75-$85 million in fiscal 2018.

Apart from GameStop, other retailers such as Five Below FIVE and Target TGT recorded comparable store sales growth of 4.9% and 5.7%, respectively, during the holiday season. Further, Zumiez ZUMZ witnessed a respective 2.3% and 4.9% comps growth in November and December.

GameStop, which operates over 5,800 stores across 14 countries, carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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