Strong Q1 Sales Posted By GameStop

GameStop Corp, the largest retailer of gaming consoles and videogames in the world, on Thursday posted quarterly results that were better than expected. However, the earnings forecast for the full-year were not changed. In extended trading the price of its shares declined by 6%. The earnings forecast for the full year will remain unchanged at between $3.10 and $3.40.

The better-than-expected results for the first quarter that ended on April 29 were attributed to the robust sales of the Nintendo Switch console which was recently launched. This assisted in offsetting a fall in videogame sales. But since GameStops lacks insight into what kind of gaming device Nintendo will be introducing, the gaming retailer declined to raise forecast for the full year. This was according to Robert Lloyd, the chief financial officer.

“Without visibility into the product they can deliver to us … it is tougher for us to raise our estimates,” said Lloyd.

High demand

Nintendo is however upbeat about its Switch console and is expected the annual operating profits to double as a result. In a post-earnings call an executive at GameStop also revealed that the demand for the console was higher than the demand.

Other products that contributed to GameStop’s strong sales in the first quarter included a new title by Take-Two Interactive, “Red Dead Redemption: 2”.

The demand for videogames that come as physical copies has fallen in recent years due to a trend by gamers to purchase their games online as downloads. This has resulted in publishers of videogames enjoying higher profit margins but has hurt retailers of videogames.

Widening portfolio

One of the steps GameStop has taken to counter the shift is widen the offerings in its store by stocking device such as tablets and smartphones in the more than 7,500 brick and mortar outlets it owns. Sales at those outlets increased by 21% in the first quarter of this year though that constitute about 10% of total revenue.

While analysts were expecting a decline of 3.6% in sales at GameStop’s established stores, the sales instead rose by 2.3%. This was according to Consensus Matrix, a research firm.

The level of net sales rose by 3.8% to reach a figure of $2.05 billion. This also beat the estimates by analysts as they were expecting a figure of $1.94 billion. Net income declined by 58 cents a share or by 10.3%. This was attributed to a rise in expenses. Earnings per share of 63 cents were recorded.

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