January 12, 2018
GameStop Jan. 12 saw shares fall more than 11% in midday trading after the nation’s largest video game retailer warned of a $300 million to $400 million impairment charge in the fourth quarter, ending March 31.
The company related the charge to its technology brands business, which includes selling third-party cell phones.
GameStop said consumers are waiting longer to upgrade existing phones, in addition to AT&T changing its compensation structure, among other issues. The charges will not affect company cash flows or liquidity.
Technology brands sales, which are not included in comparable store sales, decreased 18.6%, driven by limited availability of the iPhone X.
“Tech brands continues to lag, with holiday underperformance largely tied to iPhone inventory constraints and the ongoing impact of AT&T’s compensation structure changes,” Baird research analysts wrote in a note.
Meanwhile, total global sales for the nine-week winter holiday period (ended Dec. 31, 2017) were $2.77 billion, up 10.6% compared to the 2016 holiday period. Total comparable store sales increased 11.8%, growing, 13.7% in the U.S. and 7.9% internationally. Worldwide omni-channel sales increased 21.5%.
New hardware sales increased 38.3%, driven by Nintendo Switch and the launch of Microsoft’s Xbox One X. New video game software sales increased 7.3%, largely due to the success of Activision’s Call of Duty: WWII and continued strength in Nintendo Switch titles.
Pre-owned sales declined 8.1%, as customers shifted spending to new titles and collectibles products. Indeed, collectibles sales increased 19.4% to $211.3 million, driven by strong performance across apparel and toys.
Video game accessories sales grew 33.7%, primarily related to demand for Nintendo Switch accessories.
Digital sales and non-GAAP digital receipts increased 36.7% and 6.7%, respectively, excluding the 2016 holiday period revenues from “Kongregate,” which was divested in July 2017. On a reported basis, digital sales increased 4.6%, while non-GAAP digital receipts increased 2.2%.