GameStop Earnings: Five Quarters in a Row of Expanding Margins, Net Income Drops

S&P 500 (NYSE:SPY) component GameStop Corp. (NYSE:GME) reported its results for the second 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

Results: Net income for GameStop Corp. fell to $21 million (16 cents per share) vs. $30.9 million (22 cents per share) a year earlier. This is a decline of 32% from the year-earlier quarter.

Revenue: Fell 11.1% to $1.55 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: GameStop Corp. beat the mean analyst estimate of 15 cents per share. It fell short of the average revenue estimate of $2.07 billion.

Quoting Management: Paul Raines, chief executive officer, stated, “We continue to see solid sales growth as well as strong margins in our new retail offerings and digital channels. We are focused on staying ahead of the curve as the competitive landscape evolves and we manage through the trough of the console cycle. Finally, the ongoing share buyback and increase in dividend demonstrate our confidence in the future of GameStop and our commitment to improving total shareholder returns.”

Key Stats:

Last quarter marked the fifth consecutive quarter of increasing gross margins, as the company’s gross margin expanded 2.3 percentage points from the year-earlier quarter to 33.5%. During this time, margins have grown an average of two percentage points per quarter on a year-over-year basis.

Revenue has been on the decline for three quarters in a row. In the first quarter, revenue declined 12.2% to $2 billion while the figure fell 3.1% in the fourth quarter of the last fiscal year from the year earlier.

The company beat estimates last quarter after meeting expectations in the first quarter with net income of 54 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the third quarter has moved down from 43 cents a share to 41 cents over the last ninety days. The average estimate for the fiscal year is $3.15 per share, down from $3.20 ninety days ago.

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

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