GameStop drops 9% after sales, EBITDA fall short

Dec. 08, 2020 4:15 PM ETGameStop Corp. (GME)GMEBy: Clark Schultz, SA News Editor62 Comments
  • GameStop (NYSE:GME) reports e-commerce sales rose 257% in Q3 to help offset softer store traffic. Comparable sales were still down 24.6% vs. -20.5% consensus. The unplanned shift of software titles later into FQ4 and FY21 impacted results.
  • Revenue breakdown: Hardware and accessories $413.4M, Software $444.4M, Collectibles $146.9M.
  • Adjusted EBITDA was -$61.8M vs. +$7.7M a year ago and the consensus mark of -$33.3M.
  • Gross margin declined 320 bps from a year ago, with an increase in the mix of collectibles sales, a higher-margin product category, more than offset by the mix of hardware sales, which carry a lower gross margin, and an increase in industry-wide freight costs and credit card processing fees as a result of higher E-Commerce sales penetration.
  • Q4 outlook: "We begin the fourth quarter with unprecedented demand in new video game consoles that launched in November, which drove a 16.5% increase in comparable store sales for the month, despite being closed on Thanksgiving Day and the impact of COVID-19 related store closures, which affected most of our European footprint. We anticipate, for the first time in many quarters, that the fourth quarter will include positive year-on-year sales growth and profitability, reflecting the introduction of new gaming consoles, our elevated omni-channel capabilities and continued benefits from our cost and efficiency initiatives, even with the potential further negative impacts on our operations due to the global COVID-19 pandemic. Overall, we remain confident in our strategy and look forward to executing in 2021 on the many exciting opportunities to leverage our brand, extensive loyalty member base, and increased digital capabilities to expand our addressable market and product offerings, providing growth in all things games and entertainment."
  • Previously: GameStop EPS beats by $0.32, misses on revenue
  • Shares of GameStop are down 8.56% AH, after gaining 3.61% during the regular session into the report.
  • What to watch: Short interest on GameStop is at 162% of total float. The recent vibe from Wall Street has been positive with positive comments from Wedbush and Telsey.

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