GameStop stock plunged Friday after the Grapevine-based video game and electronics retailer reported lower fourth-quarter sales and profits Thursday afternoon and said it would no longer issue quarterly earnings guidance.
Net earnings for the three months ended Jan. 28 declined by 16 percent to $208.7 million, including charges of $56.5 million for store closings and asset impairments. Total sales decreased by 13.6 percent to $3.05 billion as comparable store sales declined by 20.8 percent in the U.S. The company cited weak game sales and aggressive console promotions by competitors during the holiday season.
GameStop had signaled the dismal earnings in January when it reported its holiday sales fell by 18.7 percent and said it would close an undetermined number of stores. On Thursday, the company said it plans to reduce its global store footprint of 7,500 stores by 2 to 3 percent, or at least 150 stores.
On a conference call, CEO Paul Raines said the company, which has been quickly expanding into new retail areas, wants to take a longer-term approach and would now only issue annual earnings guidance. For 2017, it expects net income between $320 million and $354 million, compared to $353.2 million in 2016, and total sales to range from down 2 percent to up 2 percent.
The results were released after the close of trading on Wall Street Thursday. GameStop shares (ticker: GME), which have lost more than 20 percent in the past year, lost $3.26 a share, or more than 13 percent, to $20.70 Friday.
The video game giant is diversifying as its core customers move away from physical video games to downloading games directly online. In the past couple of years, GameStop has acquired new retail businesses — with growing chains of AT&T Wireless stores, Simply Mac accessory stores and sales of toys and collectibles.
Sales in its Technology Brands stores increased by 44 percent in the fourth quarter to $256 million and operating earnings reached $34 million. Meanwhile, its collectibles business — which sells toys, clothing and novelty items licensed from video games, movies and TV shows — produced sales of $212.4 million and its chain of ThinkGeek stores expanded to 24 in the U.S. GameStop is carving out bigger spaces in its video game stores for the merchandise, and collectibles is expected to become a $1 billion business by 2019.
Despite the down year, Raines said the company’s diversification strategy is sound.
“We have persevered and we find ourselves with an abundance of business opportunities,” he said.