GameStop Corp. Earnings Cheat Sheet: Net Income Keeps Falling

S&P 500 (NYSE:SPY) component GameStop Corp. (NYSE:GME) reported its results for the third quarter. GameStop operates as a retailer of video game products and PC entertainment software. It sells video game hardware, software and accessories, and PC entertainment software.

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GameStop Corp Earnings Cheat Sheet for the Third Quarter

Results: Net income for the electronics store fell to $53.9 million (39 cents per share) vs. $54.7 million (36 cents per share) a year earlier. This is a decline of 1.5% from the year earlier quarter.

Revenue: Rose 2.5% to $1.95 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: GME fell in line with the mean analyst estimate of 39 cents per share. Analysts were expecting revenue of $1.97 billion.

Quoting Management: Paul Raines, chief executive officer, stated, “In the third quarter, GameStop outperformed the market and continued to execute against the long-term strategic plan through additional investments in digital and emerging businesses. We expect that our innovative digital, iDevice and gaming tablet businesses will supplement our leading retail business this holiday. As we begin the fourth quarter, the strong sell-through of November new title releases indicates a good start to the holiday season. We know that GameStop’s buy-sell-trade value proposition and PowerUp Rewards program with 14.5 million members place us on the short list of preferred shopping destinations.”

Key Stats:

The company has now seen net income fall in each of the last two quarters. In the second quarter, net income fell 23.4% from the year earlier quarter.

The company fell in line with estimates last quarter after topping expectations in the previous two quarters. In the second quarter, it topped the mark by one cent, and in the first quarter, it was ahead by 2 cents.

Gross margins grew 0.8 percentage point to 29.5%. The growth seemed to be driven by increased revenue, as the figure rose 2.7% from the year earlier quarter while costs rose 1.6%.

Revenue rose last quarter after seeing a drop the quarter before. Revenue fell 3.1% to $1.74 billion in the second quarter from the year earlier.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from $1.76 a share to $1.73 over the last ninety days. In the last thirty days, the average estimate for the fiscal year has moved up from $2.89 per share to $2.90.

Competitors to Watch: Best Buy Co., Inc. (NYSE:BBY), RadioShack Corporation (NYSE:RSH), CONN’S, Inc. (NASDAQ:CONN), hhgregg, Inc. (NYSE:HGG), Rent-A-Center, Inc (NASDAQ:RCII), (NASDAQ:AMZN), eBay (NASDAQ:EBAY), Wal-Mart (NYSE:WMT) and Target (NYSE:TGT).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)