GameStop Corporation (GME) the biggest video game retailer, reported third quarter earnings of 32 cents per share, slightly above the Zacks Consensus Estimate of 31 cents. The reported earnings were 6% lower than prior-year quarter.
Revenue for the quarter increased 8.2% to $1,834.7 million compared to $1,695.7 million reported in the year-ago quarter. The company’s top-line benefited from strong new title releases and price cuts on all current generation platforms.
While new software sales grew 9.4%, used product sales increased 19.4% during the quarter. However, comparable store sales dropped 7.8% due to a decline in new video game hardware sales. New video game hardware sales fell 2%. The company opened 86 stores during the quarter, including 48 in the U.S.
Gross margin increased 60 basis points year-over-year to 28.5% in the reported quarter. The margin improvement was a result of product mix shift from low-margin hardware sales to higher-margin software sales.
GameStop reiterated fourth quarter earnings guidance in the range of $1.47 to $1.65 per share, compared to $1.39 in the prior-year quarter. The company expects comparable store sales in the range of -7.0% to -1.0%.
For the full year, GameStop forecasts EPS of $2.45-$2.63, which reflects year-over-year EPS growth of 2% to 10%. Comparable store sales are expected to decline between 7.0% and 4.0% for the year.
The company continues to generate significant cash flow, utilizing it for opening new stores and acquisitions. For fiscal year 2009, GameStop expects to generate free cash flow in the range of $400 million to $425 million.
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