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Shares of GameStop Corp. (NYSE: GME) fell 13.6% Friday after the video game retailer followed mixed fiscal-fourth-quarter 2016 results with disappointing forward guidance.
GameStop's quarterly revenue fell 13.6% year over year, to $3.05 billion, driven by weak sales of certain AAA (high-budget, high-promotion) game titles and aggressive Thanksgiving and Black Friday console promotions by competitors. GameStop also saw consolidated comparable-store sales fall 16.3%, including a 20.8% drop in the U.S. and 4.6% declines internationally. On the bottom line, that translated to a 3.1% decline in adjusted net income, to $243.8 million, or $2.38 per diluted share. By comparison, analysts' consensus estimates called for lower adjusted earnings of $2.29 per share on higher revenue of $3.1 billion.
Image source: GameStop via Business Wire.
Note that GameStop bolstered its per-share earnings by repurchasing 1.66 million shares last quarter for $39.1 million, bringing full-year repurchases to 3.01 million shares for $75.1 million. That leaves $170.2 million remaining under GameStop's existing repurchase authorization. What's more, as you may recall, earlier this month the company boosted its regular annual cash dividend by 2.7%, to $1.52 per share.
Looking forward, however, GameStop CFO Rob Lloyd also told investors the company will no longer provide earnings or same-store sales guidance on a quarterly basis. Instead, GameStop will offer updates to its annual outlook with the hope of "[reducing] investor distraction as we continue to diversify the company and seek to maximize long-term shareholder value."
GameStop anticipates revenue for the full fiscal year of 2017 to be in the range of down 2% to up 2% from $8.61 billion in fiscal 2016, including a flat to negative 5% change in comparable-store sales. That should result in net income of $320 million to $354 million, or $3.10 per share to $3.40 per share. By comparison, Wall Street was modeling fiscal 2017 revenue of $8.68 billion, and earnings of $3.73 per share.
In the end, it's hard to blame GameStop management for wanting to shift investors' focus toward their longer-term targets, especially given volatility in today's difficult retail environment. But considering those longer-term targets fell well short of the numbers for which investors had hoped, it's no surprise to see GameStop stock trading down today.
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