Shares of GameStop Tank After Disappointing Earnings Report

The stock is down more than 70% from a year earlier.

On Tuesday, GameStop delivered its second-quarter earnings report after market close. The second-quarter earnings fell short of investor expectations and company executives lowered their guidance for the remainder of the year. This caused the stock to fall more than 15%

The company really needed to deliver a positive earnings report this week, though few investors were really expecting this to happen. The stock has been on a freefall over the past year, losing 64% of its value in 2019 alone. 

This is largely due to sluggish sales due to the shift to online gaming. Here is an overview of the earnings report and what you can expect from GameStop going forward.

What went wrong during the second quarter?

During the second quarter, GameStop reported a loss of 32 cents per share which is higher than the loss of 21 cents per share analysts were expecting. Total revenue came in at $1.29 billion, which fell short of the $1.34 billion anticipated.

And GameStop executives lowered their guidance for in-store sales for the rest of the year. Previously, the company expected same-store sales to fall by 5% to 10% but now it’s expecting these figures to fall somewhere in the low teens. 

On a positive note, the company did pay off $50 million in debt and cut its total debt load in half. And GameStop did see rare growth in its collectibles segment, which increased by 21%. This was due to strong demand at both international and domestic stores. 

Is a comeback in store for GameStop?

In a written statement, GameStop CFO Jim Bell said the company was unsurprised by the falling sales. Bell said the decline is “consistent with what we have historically observed towards the end of a hardware cycle.”

GameStop executives do have a plan in place to turn the company around and expects that it will be successful. However, it doesn’t expect that this will happen until 2021. It plans to do this by improving efficiencies, expanding its digital presence, and finding additional streams of revenue.

However, this improvement plan is vague at best. And this latest earnings report offers very little confidence that the company will be successful in its turnaround efforts.