GameStop Reports Strong Beat; Shares Slide on Soft Guidance

Shares of video game retailer GameStop Corp. fell 7.15% in mid-day trading Tuesday (as of 12:20 PM ET) despite a strong Q3 earnings beat on soft forward guidance. Net income nearly quadrupled to $52 million (EPS of $0.31), versus net of $13.6 million (EPS of $0.09) a year ago. Sales jumped 59.3% to $1.61 billion, while comparable store sales rose 46.3%, well above previous guidance of 30%-32% growth. Consensus analyst estimates were for EPS of $0.23 on sales of $1.4 billion. The company reported especially strong sales of Microsoft's Halo 3 and Electronic Arts' Madden NFL '08. Chairman and CEO R. Richard Fontaine called GameStop's latest earnings "a particularly strong statement," adding, "our expenses and inventory controls have never been better planned and executed, and the scheduling of sales support for our more diverse customer base is more refined and productive than ever before," (full earnings call transcript later today). But Fontaine's enthusiasm failed to carry into earnings projections for next quarter: GameStop issued EPS guidance of $0.95 to $0.97 in Q4. Analysts were, on average, expecting a more robust Q4 EPS of $1.01.

Sources: Press release, MarketWatch, Dow Jones Newswires, Trading Markets, AP
Commentary: UBS Cuts GameStop Rating on Valuation Concerns • Understanding Current Teen Trends, Courtesy of the Earnings Calls • Cramer on GME
Stocks to watch: GME, MSFT, ERTS. Competitors: BBY, CC. ETFs: FXD, RFG
Earnings call transcript: GameStop F2Q07 (Qtr End 8/4/07)

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