Credit: Shutterstock photoBogged down by weak software and hardware sales, GameStop's ( GME ) revenues and comparable sales slipped a little year-over-year in the third quarter of fiscal 2016. The company reported revenues at $1.96 billion, down 2.8% annually, and just below the company's guidance and consensus estimates. However, GameStop managed to beat estimates on earnings per share by two cents, and due to the combined effect of the aforementioned outcomes, the stock remained relatively stable.
With falling demand, the company's hardware sales dipped more than 20% and software sales were down 8.6%. The video game market remained soft due to declining demand of previous generation consoles and lack of fresh game titles. And these appear to be the reasons behind the company's lackluster performance during the quarter. However, GameStop's non-gaming business continues to perform well, with technology brands and collectibles registering 54.5% and 37.3% growth in revenues, respectively.
Post the earnings, GameStop's CEO reassured investors that while the video game business has underperformed recently, the company remains focused on maintaining its leadership position in the market, especially during the holiday season. Long term focus would remain on diversifying the business by focusing on collectibles and technology brands. At the moment, these segments are churning out heavy growth mainly due to aggressive expansion of technology brand stores through acquisition. And this trend is likely to persist for a while, which essentially means that GameStop does have some time to get its mainline business back on track, while its smaller and performing segments offset the apparent topline weakness. Following the results, GameStop reaffirmed its annual guidance of a decline in comparable sales in the 6.5%-9.5% range, with EPS between $3.65-$3.80.
Have more questions on GameStop ( GME )? See the links below:
- How Has GameStop's Revenue And Gross Profit Composition Changed Over 2011-2015?
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- What's GameStop's Fundamental Value Based On Expected 2016 Results?
- GameStop Q4 Earnings Preview: Technology Brands & Digital Segment To Remain The Highlight; Core Segments Struggle
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