GameStop projects soft video game sales as profits decline

Grapevine-based GameStop reported declines in fiscal third-quarter profit and revenue, a sign that the retailer’s investment in mobile-phone stores isn’t yet making up for a decline in physical video-game sales.

Net income was $50.8 million, or 49 cents a share, for the quarter that ended Oct. 29, off from $55.9 million last year, the company said Tuesday in a release after the stock market had closed. That compared with the 47-cent average of analysts’ projections compiled by Bloomberg. Sales of $1.96 billion missed the $1.99 billion average estimate.

GameStop also said same-store sales will slide 7 percent to 12 percent in the current quarter. The company had already announced its preliminary earnings and its full-year forecast earlier in November.

Core video game sales declined, with hardware off 20.6 percent and software off 8.6 percent. But its growing Technology Brands businesses, led by AT&T Wireless stores, saw sales increase 54 percent to $216 million. And operating earnings were $23.5 million — nearly half the company’s total.

Chief Executive Offiver Paul Raines said that “while the video game business has underperformed recently, we are focused on maintaining our leading market position, especially during the holiday season, as well as driving diversification through the growth of Technology Brands, Digital and Collectibles.”

In a conference call with analysts, Raines said he remains “cautiously optimistic” about the future of the video game business. Discussing the soft video game market, he said that the latest Call of Duty game had underperformed expectations.

GameStop shares plunged earlier this month after saying sales at its stores open for at least a year would be down as much as 7 percent for the quarter and that earnings would be in the range of 45 cents to 49 cents a share. New titles released in October disappointed, the company said in a Nov. 2 statement.

Shares of GameStop (ticker: GME) rose 40 cents in after-hours trading to $24.51, after gaining 65 cents during the regular trading session.

This story was originally published November 22, 2016 at 5:24 PM with the headline "GameStop projects soft video game sales as profits decline."