GameStop Corp. (NYSE: GME) stock plunged 35.5% on June 6th, 2019 (Source: Google finance) after the company halted its quarterly dividend and reported fall in first-quarter revenue that missed analysts’ estimates driven by slowing sales of video games and consoles at its stores. GameStop said it would use the capital meant for dividend payments towards debt reduction and investing in driving margin improvement through better sourcing, pricing and promotion activities. The stoppage of dividend will save about $157 million per annum, besides helping in cutting its nearly $500 million debt burden. GameStop’s net income fell to $6.8 million in the quarter ended May 4, from $28.2 million, a year earlier. The company has been struggling with shrinking profits as consumers shift to downloadable videogames instead of buying physical versions from stores. GME also faces a major threat from the rising advent of game streaming, with technology giants like Alphabet Inc’s Google, Microsoft and others getting into the still nascent space.
Further, GameStop, that saw several changes in management since Chief Executive Officer J. Paul Raines passed away last March, has been cutting costs to remodel itself in the face of a changing retail landscape. Two months ago, the company named retail industry veteran George Sherman as chief executive officer, its fifth CEO in just over a year, and it named James Bell as its chief financial officer last week.
GME in the first quarter of FY 19 has reported the adjusted earnings per share of 7 cents. The company had reported 13.3 percent fall in the adjusted revenue to $1.55 billion in the first quarter of FY 19, missing the analysts’ estimates for revenue of $1.64 billion. New hardware sales plummet 35%, with an increase in Nintendo Switch sales more than offset by a decline in Microsoft Corp’s Xbox One and Sony Corp’s PlayStation 4 console sales. Sales of pre-owned products fell 20.3% to $395.3 million in the first quarter, while sales from its collectibles business rose 10.5% to $157.3 million. Sales of pre-owned products fell 20.3% to $395.3 million in the first quarter, while sales from its collectibles business rose 10.5% to $157.3 million. Comparable sales fell 10.3% last quarter, while the analysts had estimated a 6.4% decrease, according to Consensus Metrix.
Meanwhile, GameStop also said that it will cut costs at its ThinkGeek collectibles business by consolidating the online operation with the main company website.