GME stock has dipped significantly this year, falling to its lowest valuation in 10 years. For over a year, GameStop’s (NYSE:GME) earnings reports have been uninspiring, and now, as it prepares to release the Q3 report on December 10, shareholders will be looking at whether the company’s turnaround strategy is working.
GameStop Expects Soft Results in Q3
Concerns emerged over GameStop’s future following a drop of waning trends in the core video game business. However, GameStop’s solid management team is working on a recovery plan, and this could be evident in the upcoming Q3 earnings report.
Signs indicate that the company is expecting soft revenue results in Q3. In the second quarter this year, a declining trend of comparable-stores sales continued from Q1, with sales slumping 11.6% relative to 10.3% in the previous quarter.
Management indicated that things could get worse before improving. This is because of waning demand across the company’s software and hardware offerings, including pre-owned games.
At the time of writing, GME stock is up 0.75% at $6.71.
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Comparable Sales to Drop
In September, CFO James Bell indicated that comparable same-stores sales could drop to a low range this year. Analysts are now expecting the company to have revenue of around $1.62 billion relative to last year’s $2.08 billion.
In the last quarter, the company’s gross profit held steady, although that didn’t necessarily portray good news. Decreasing demand for new hardware helped in offsetting modest drops in pre-owned games and accessories for the protection of profitability. GameStop adjusted for its $400 million goodwill charge, but adjusted loss widened to $32 million.
GameStop might continue experiencing sales pressures that will affect earnings in the quarter, but the good news is investors should expect some cost cuts. The company has been cutting inventory as well as closing underperforming stores. Although reversing the downward trend will take time, the company needs to show that it has found a strategy for sales growth before investors begin to feel confident once more.
GME stock has tumbled over 49% so far this year.
Featured image: DepositPhotos © belchonock
