GameStop Q1 Profit Declines 52%; Company Names Interim CEO

GameStop May 31 reported first-quarter (ended May 5) profit of $28.2 million, down 52% from profit of $59 million during the previous-year period. Revenue declined 5.4% to $1.9 billion from $2 billion last year.

The nation’s largest video game retail chain attributed the decline in large part to year-over-year comparisons with Nintendo’s bow of the Switch platform.

New hardware sales decreased 7.9%, while new software sales decreased 10.3%. Software sales were impacted by the strength of titles across platforms that launched in the prior fiscal year. Pre-owned sales declined 5.8% and worldwide omnichannel sales decreased 46% due to limited allocation of the Nintendo Switch at launch, which drove 93% increase in omnichannel sales in the first quarter of fiscal 2017.

Digital sales increased 29.6%, excluding the first quarter 2017 revenue from Kongregate, which was sold in July 2017. On a reported basis, digital sales decreased 2.5% to $43.0 million.

Collectibles sales increased 24.4% to $142.4 million, driven by continued expansion of licensed merchandise offerings and unique product offerings.

Technology Brands sales decreased 16.1% to $169.0 million, primarily due to less promotional activity and the overlap of the previously disclosed change in AT&T’s dealer compensation structure from the previous year. Technology Brands operating earnings reached $9.8 million. Technology Brands operating earnings, excluding store closure and other charges, were $11.2 million compared to $18.4 million in the prior-year quarter.

Separately, GameStop announced that Shane Kim, currently a board member and former Microsoft executive, will serve as interim CEO until a permanent CEO is named. Rob Lloydwas promoted to COO and CFO. Previous interim CEO Dan DeMatteo will continue serving as executive chairman of the board.

“We are fortunate to have Shane assume the role … and welcome his insight as a video game industry veteran,” DeMatteo said in a statement. “Shane has been an actively engaged member of the board since 2011, and will bring additional executive focus, energy and passion to the organization during this time of transition.”

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