Video game retail sales took another hit when GameStop, the world’s largest physical video game retailer, Jan. 13 reported a 27.5% decline in sales for the nine-week holiday period ended Jan. 4 compared with the previous-year period. Total comparable store sales decreased 24.7%, following a 1.5% increase in comparable store sales for the similar period in fiscal 2018.
The gaming sector continues to suffer from consumer indifference while awaiting next-generation consoles coming out this winter.
“We expected a challenging sales environment for the holiday season as our customers continue to delay purchases ahead of anticipated console launches in late 2020,” CEO George Sherman said in a statement. “However, the accelerated decline in new hardware and software sales coming out of Black Friday and throughout the month of December was well below our expectations, reflective of overall industry trends.”
Sherman said the chain saw continued growth in the Nintendo Switch platform, which he said supports management’s view sales will strengthen as new consoles and innovative technology are introduced.
GameStop re-adjusted its sales outlook for fiscal 2019 and now expect earnings to be below guidance.
Comparable store sales are now expected to decline in the range of 19% to 21% for fiscal 2019. While not updating earnings per share guidance at this time, GameStop expects an adjusted net loss for the fiscal year, with adjusted earnings per diluted share impacted by the further deceleration in sales in December.
Despite the downturn, Sherman said the retailer continues to manage inventory effectively and anticipates ending fiscal 2019 with inventory down approximately 26% as compared to the fiscal year ending 2018.
GameStop now expects capital expenditures for FY2019 to be in the range of $75 million to $80 million, and forecasts total cash and liquidity, including availability under the revolving line of credit, at the end of the fiscal year to be approximately $900 million.
“While we expect the challenges that we faced in the fourth quarter to continue into fiscal 2020, we believe we have the right long-term action plans in place to optimize profitability and increase new revenue streams in advance of new console introductions for holiday 2020,” Sherman said.
GameStop reports fourth-quarter and full fiscal-year 2019 results in late March. Wall Street isn’t waiting, sending shares down more than 8% in after-market trading.