2015/11/23

Here's Why Shares of GameStop are Tanking

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  • The stock is down 14%.

    GameStop shares tumbled Monday after the video game retailer reported weaker than expected sales even as it tried to reassure investors that full-year targets are still achievable.
    The stock slid more than 17% on Monday morning, after GameStop  GME -8.46%  reported third-quarter same-store sales slid 1.1% while overall net sales dropped 3.6% to $2.07 billion. Analysts had expected same-store sales to rise 3.4%, according to a survey conducted by Consensus Metrix. The overall sales total also fell short of expectations.
    New hardware sales were hit especially hard during the quarter, slumping 20%, while new software sales dropped 9.3%.
    In a press release, CEO Paul Raines blamed lower than expected new software and hardware sales and delays in the company’s Technology Brands store openings, a segment that includes Simply Mac and Spring Mobile stores. Simply Mac sells Apple  AAPL -1.37%  products and repair services, while Spring Mobile sells post-paid AT&T  T -0.59%  services and wireless products. Those stores help GameStop diversify beyond its core video game business.
    Raines tried to assuage concerns by saying GameStop’s expectations for the full year had not changed, including its profit target. He said he expects a solid slate of new video games, as well as contributions from the AT&T and Apple businesses, should drive fourth-quarter results. One hit expected to generate a lot of interest this holiday season is Electronic Arts’  EA -5.77%  Star Wars Battlefront game.
    BB&T analyst Anthony C. Chukumba said his rating and price target on GameStop were “under review” pending the company’s earnings call with investors.
    “We believe the company’s performance is even more concerning given the fact it should theoretically be hitting the “sweet spot” of the current video game console cycle,” he wrote.
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