GameStop crashes after the video game retailer reported another disastrous quarter, new leadership frustrates Wall Street
- GameStop shares crashed early Wednesday after the video game retailer reported another disastrous quarter the evening prior and eliminated its dividend.
- The company's last quarterly earnings report also fell short of analysts' expectations.
- Watch GameStop trade live.
GameStop shares crashed 30% early Thursday after the beleaguered video game and consumer electronics retailer reported disappointing fiscal first-quarter sales amid declining hardware sales. It also eliminated its quarterly cash dividend.
The chain has come under pressure in recent years amid shifts in the video game industry, analysts say. GameStop's plunging hardware and software sales, paired with declining comparable US and international same-store sales, reflect consumers' changing tastes around gaming.
"Since joining GameStop in April, I have been undertaking a thorough review of the business and working closely with the team to improve our operational and financial performance, address the challenges that have impacted our results, and execute both deliberately and with urgency," CEO George Sherman said in a statement.
Here's what GameStop reported compared with what analysts polled by Bloomberg expected:
- Revenue: $1.55 billion ($1.64 billion expected)
- Adjusted earnings per share (EPS): $0.07 (-$0.03 expected)
The earnings report comes amid a sweeping executive overhaul at the company.
GameStop said May 30 it named a new chief financial officer after naming Sherman chief executive officer in April. The retailer also announced last week it named a new chief merchandising officer and chief customer officer, both newly created roles.
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Some equity analysts were unimpressed with what the newly minted leadership offered shareholders.
GameStop management's commentary was "uninspiring" and "lacked any coherent articulation of a tangible vision on how to transform the business," the Benchmark analyst Mike Hickey told clients in a Thursday note.
"The only impactful transformation we see in GME's future is the industry's on-going transition to the digital economy, a viable scenario where GME has little value," Hickey, who recommends selling the stock and reduced his price target to $5 from $9, wrote.
Other analysts are skeptical new management can weather challenges across not only the video game industry, but the brick-and-mortar retail industry, too.
"Under new management, an extensive diagnostics phase is underway but the vectors of industry change and a legacy retail model are increasingly at odds," the Jefferies analyst Stephanie Wissink, who recommends holding the stock, told clients Wednesday.
"Q1 results fell short on a number of key measures and when combined with the elim of the dividend and necessary deep cuts to costs, the fracturing of the model is becoming a greater concern," she added.
Read more: The 34 hottest video games you shouldn't miss in 2019
The report out Tuesday afternoon followed a similarly poor showing the quarter prior. GameStop shares plunged in April after the company reported earnings that missed analysts' expectations and said it would not offer annual earnings per share guidance.
Hickey is counted among several bearish Wall Street analysts, but the majority of his peers are neutral on the sinking stock. Of those polled by Bloomberg, two analysts say "buy," six say "hold," and three say "sell."
Shares have fallen 37% this year through Wednesday, closing at $7.82 a share.
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