GameStop is ‘evaluating all aspects of its business’ after third quarter losses of $488.6 million

Despite a 12.8 per cent jump in new hardware sales, and a 11 per cent increase in software sales, GameStop is reporting a $488.6 million loss across its third fiscal quarter.

The company notes that the release of Spider-Man, Red Dead Redemption 2 and the revised release schedule for Call of Duty have contributed to a year-over-year boost in sales of 5 per cent, taking revenue to $2.08 billion, but this increase is tempered by a decline in its used good sales which have dropped more than 13 per cent to almost £397 million.

Overall, however, the retailer reports a net loss of $488.6 million across the quarter – a significant fall from the $59.4 million profit the same quarter generated this time last year. It attributes the loss to a "non-operating, non-cash intangible asset impairment charge of $587.5 million, primarily related to goodwill and triggered by the sustained decline in the company’s share price".

"We experienced solid growth in the third quarter, including double-digit growth across software, hardware, accessories and collectibles, underscoring GameStop’s leadership position in video games and our unique ability to satisfy all of our customers’ entertainment needs," said Rob Lloyd, chief operating officer and chief financial officer. "We are especially pleased with our performance in October, a month where The NPD Group disclosed that the U.S. physical video game industry grew by 46% while our U.S. physical video game revenue outpaced the industry and increased 63% resulting in market share gains."

"While our Black Friday and Cyber Monday sales were strong, we anticipate that our fourth quarter sales will skew more towards hardware than initially planned which, along with underperformance of certain titles, weakness in pre-owned and recent sales promotions, will result in fourth quarter earnings that are below our previous expectations," Lloyd added. "Importantly, we are evaluating all aspects of our business, including our store and omni-channel experience, cost structure, strategic and economic partnerships with publishing and platform partners, and relationships with customers and the services we offer to them, to enhance our business and drive growth and profitability over the long term."

Consequently, the company has now revised its 2018 guidance and said it is talking with "third parties" regarding a "possible transaction as part of the comprehensive review of strategic and financial alternatives currently being undertaken by the company’s board of directors". 

The $700 million raised by the recent sale of its Spring Mobile chain to AT&T wireless stores – which is expected to close in the fourth quarter of the 2018 fiscal year – may be used to "reduce the company’s outstanding debt, fund share repurchases, reinvest in core video game and collectibles businesses to drive growth, or some combination of these options". 

About Vikki Blake

It took 15 years of civil service monotony for Vikki to crack and switch to writing about games. She has since become an experienced reporter and critic working with a number of specialist and mainstream outlets in both the UK and beyond, including Eurogamer, GamesRadar+, IGN, MTV, and Variety.

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