Why GameStop Corp. Stock Plunged Today

By Markets Fool.com

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What:Shares ofGameStop Corp.(NYSE: GME)fell 10.6% Friday after the specialty gaming retailer announced weaker-than-expected fiscal second-quarter 2016 results.

So what:Quarterly revenue fell 7.4% year over year, to $1.63 billion, driven by a 10.6% decline in consolidated comparable-store sales. GameStop noted that video game sales were hurt by a lack of new titles compared to those launched in the same year-ago period, while hardware sales fell as buyers held off due to new information released about upcoming gaming consoles.

On the bottom line, that translated to a 15.7% decline in adjusted net income, to $27.9 million, and a 12.9% drop in adjusted net income per share, to $0.27.

GameStop CEO Paul Raines added:

As expected, the continued growth and increased profit contribution of our non-physical gaming businesses drove our second-quarter results. Tech Brands sales grew more than 50%, omni-channel sales increased 16%, Collectibles sales more than doubled and year to date, more than half ofGameStop'soperating earnings have come from non-physical gaming categories. These new businesses offset a tough quarter for video gaming and prove that our diversification strategy is succeeding.

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While net income arrived within GameStop's guidance range (provided last quarter) for earnings per share of $0.23 to $0.30, that guidance also called for a less-severe comparable-store sales decline in the range of 7% to 4%.

Now what:In addition, for the current quarter, GameStop anticipates comparable-store sales to range from negative 2% to growth of 1%, with diluted earnings per share in the range of $0.53 to $0.58. Finally, GameStop reiterated its previous guidance for full-year diluted earnings per share of $3.90 to $4.05, but also reduced its expectations for comparable-store sales, which are now expected to decline in the range of 4.5% to 1.5% (compared to previous guidance for comps to be in the range of negative 3% to flat as compared to 2015).

That's not to say GameStop's results were overwhelmingly negative. And investors can take some solace knowing its efforts to diversify are proving effective in combating today's difficult environment for video gaming. But in the end, considering GameStop's comps are still sliding to a greater degree than anticipated, it's no surprise to see the market bidding GameStop stock down today.

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Steve Symingtonhas no position in any stocks mentioned. The Motley Fool has the following options: short October 2016 $28 puts on GameStop. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.