GameStop Disappointing Guidance Rattles GME Stock: Key Factors

GME stock

GME stock sentiments could turn from bad to worse after GameStop Corp. (NYSE:GME), video-game retailer, lowered its guidance for the year, following a disappointing holiday sales season. A confirmation that full-year sales could drop 21% is the latest tailwind that continues to take a toll on the company. Reports that GameStop could lose money in the fiscal year is not going well with investors.

Disappointing Guidance

In a press release, the video game retailer notes that holiday sales dropped 27.5% to $1.83 billion. In its defense, the company maintains that the drop is indicative of overall industry trends that resulted in a massive decline in hardware and software sales. The decline in sales also came as consumers continued to defer the purchase of hardware and software, awaiting the launch of new generation game consoles late in the year.

Following a disappointing holiday sales season, GameStop has warned that the challenges experienced in the fourth quarter could persist into the first half of 2020. The decline could persist until the next holiday season, where the company expects to benefit from new console launches.

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At the time of writing, GME stock is down 12.43% at $4.76.

GameStop Outlook

The company finds itself in a precarious position as a wave of declining profits continues to gather pace. Layoffs and store closure worldwide have come into play as the company seeks to lower its operating costs to shore the bottom line. However, Chief Executive Officer George Sherman notes the company has made the right long-term action plans to strengthen revenue streams and optimize profitability.

Further confirmation is needed to affirm the company’s long-term prospects, but the unveiling and the impact of the release of new consoles is a development that will shape the company’s growth metrics.

GME stock took a significant hit in 2019, dropping by more than 50% even as the S&P 500 rallied by more than 25%. While the stock did rise in the final weeks of 2019, the upward momentum appears to be curtailed by the disappointing financial results.

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