Gamestop Corporation (GME, Financial), the American video company, reported an increase in its yearly revenue while it saw a decrease in sales in the fourth quarter. Sales decreased by 6% while profit increased by 13%. The gaming retailer also saw an upward increase in its working capital for 2014. The working capital as on January 31, 2015, was $422.80 million as compared $223.60 million on February 1 ast year. Just before the company announced its earning report, shares saw a slump of 2.6% to $38.79 on Thursday.
Financial equations
For the fourth quarter, Gamestop earned a net income of $244.1 million, that is $2.23 a share. For the same quarter ended January 31, 2014, the company reported a net income of $220.5 million, that is $1.89 a share. Comparing the figures of the two years, surely last year seems to be a boon for the gaming retailer in terms of net income. The adjusted net income excluding items was $235.5 million or $2.15 a share. For the same period in 2013, the net income reported was $222.4 million or $1.90 a share. In a data compiled by Reuters, the twenty analysts estimated an EPS of $2.17 for the same period, excluding special items. However, the sales did not show such a positive trend for the quarter. A reduction of 5.6% was reported, with sales dropping from $3.68 billion last year to $3.48 billion this year. The main division that witnessed a drop in sales was the new hardware division. The reason that the fourth quarter 2013 saw high sales was the launch of Xbox One and PlayStation 4. No doubt, this quarter turned out to be a disappointment as the company did not have any strong launches this time. The digital division witnessed a whopping 41.4% increase in sales amounting to $368.8 million. The main reason for the increase was mobile digital sales combined with downloadable content.
Management outlook
Paul Raines, Gamestop's chief executive officer, said that 2014 proved to be a year of growth, expansion and diversification for the company. He said that it witnessed its highest market share ever in next-generation hardware at 28%. For this year, the company wishes to maintain and grow its market share in the physical as well as gaming sector. The number of stores for Technology Brands is also expected to increase by 350-550. As part of Gamestop's sales transfer initiative, the company will shut down 3% of the video game stores.
Road ahead
Gamestop expects net income to be somewhere in the range from $392 million to $415 million for the entire fiscal year 2015. The operating income is expected to grow by 6.5% to 7%. The diluted EPS should be within $3.6 to $3.8 for the year. As far as the first quarter of the year is concerned, net income expected by the company ranges between $58 million and $65 million. Gamestop also expects their operating income to increase by 5% to 5.5%.
Stock impact
The shares of the Texas-based company took the beating after the company announced how the strong dollar had a negative impact on the sales for the fiscal fourth quarter. The game retailer also estimated lackluster returns for 2015, thus aggravating the dissent of its shareholders.The share prices dipped by 5% to $36.80 in aftermarket trading hours. Not only were investors disappointed, but customers also showcased their disappointment over the dwindling sales. Some consumers even went to the extent of saying that Gamestop should stop forcing warranties and stuff on their patrons. Let's see what 2015 has in store for the American video game giant.
