GME stock has plummeted in the days after its Q1 earnings report released Tuesday. Shares are currently selling for $5.04 USD on the NYSE; however, prior to the report, stock was trading comfortably sideways around the $7.80 mark.
What was so dire about GameStop’s (NYSE:GME) results to cause a near 40% selloff?
GME Stock
As stated, the company released its Q1 earnings report on Tuesday. It reported earnings of $0.07 per share, beating the Zacks Consensus Estimate that predicted a loss of $0.02 per share. However, the company’s revenue was another story entirely.
The company’s total global sales fell a massive 13.3%, and this coincided with a same-store sales decline of 10.3%. This was one of the main causes behind the GME stock plummet.
GME Sales Decrease
Further decreases were reflected in the company’s hardware sales; a lessened demand for Xbox1 and PS4 consoles meant sales in this area decreased by 35%. This was despite a strong performance shown by Nintendo Switch sales. One reason for the slower hardware sales is that, according to GameStop’s CFO Rob Lloyd, consumers are waiting to buy next-generation consoles instead.
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As with many retail outlets, the need to travel to a store to buy software is now plaguing GameStop. Software sales also decreased by 4.3% as a result of slower releases but also the ability to buy online.
Cutting Quarterly Dividend
Adding insult to injury, the company announced that it was getting rid of its quarterly dividend in “an attempt to stabilize the company’s balance sheet and use the financial breathing room to revitalize the company.”
However, this is also telling investors that GameStop is possibly close to defaulting on debts. The dividend cut also highlights how damaging these quarterly sales were and must be a huge blow for GME stock investors.
By halting its quarterly dividend, GameStop will save roughly $157 million. This figure will offset some of its nearly $500 million debt.
Now the company is expecting full-year sales between 5% and 10%. In order to truly rejuvenate this brand, analysts are now gunning for GameStop to establish itself in the digital market.
But what do you think? Are you surprised at the GME stock sell-off?
Featured Image: DepositPhotos © wolterke
