GameStop Profit Surges, Outlook Strong; Shares Up 7%

GameStop Corp. ( GME ) Thursday reported a surge in profit for the second quarter, as the video-game retailer’s revenues jumped 25 percent credited largely to strong demand for next-gen consoles Xbox One and PlayStation 4. Both earnings and revenues for the quarter came in ahead of Wall Street expectations.

Moving ahead, the company detailed a strong outlook for the third quarter and reaffirmed its full year guidance, sending its shares up over 7 percent in extended trading hours.

GameStop said revenues for the quarter reflects “very high” demand for Microsoft’s Xbox One and Sony’s PlayStation 4, as new hardware sales soared 124.8 percent.

The release of the next-gen consoles last fall has been a boon to the hardcore gaming industry as most of the companies were struggling to keep up with the change in consumer taste, as more and more gamers switched to cheaper mobile and web social games.

New software sales grew 15.6 percent driven by the strong performance of recently released new titles, such as Ubisoft’s Watch Dogs and Nintendo’sMario Kart 8.

“The second quarter demonstrates the power of the new console cycle and all of our business units, including Technology Brands, positively contributing to the company’s sales and profits,” stated CFO Rob Lloyd.

Grapevine, Texas-based GameStop’s sales for the second quarter rose 25.1 percent to $1.73 billion from $1.38 billion in the prior year quarter. Analysts polled by Thomson Reuters expected revenues of $1.65 billion for the quarter.

Comparable store sales for the quarter increased 21.9 percent.

GameStop’s second-quarter profit rose to $24.6 million or $0.22 per share from $10.5 million or $0.09 per share last year. Analysts expected earnings of $0.18 per share for the quarter. Analysts’ estimates typically exclude one-time items.

Looking forward to the third quarter, GameStop expects same-store sales growth of 1 to 5 percent and earnings of $0.58 to $0.64 per share. Analysts currently project earnings of $0.57 per share for the third quarter.

For the fiscal year 2014, the company maintained its full-year earnings guidance of $3.40 to $3.70. Analysts currently estimate earnings of $3.67 per share for the year.

Moving ahead, Lloyd said, “The back half of the year is filled with exciting games and products coming to market and I am confident that we are prepared to capitalize on these opportunities.”

GameStop also declared a quarterly dividend of $0.33 per share payable on September 16 to shareholders of record as of September 3.

GME closed Thursday’s trading at $40.49, down $0.84 or 2.03%, on the NYSE. The stock, however, gained $3.01 or 7.43% in after-hours trade.

Source: http://www.nasdaq.com/article/gamestop-profit-surges-outlook-strong-shares-up-7-20140821-00957