GameStop (GME) Q4 Earnings Miss Estimates, Sales Decline Y/Y
GameStop Corp. GME posted fourth-quarter fiscal 2023 results, delivering lower-than-expected earnings per share and revenues. While the top line declined year over year, the bottom line compared favorably with the year-ago quarter’s reported figure. Higher inflationary pressures on consumers’ spending in the gaming industry have been resulting in lower demand and in turn, weighing on the company’s results.
The video game retailer’s shares have fallen around 15.3% during after-hours trading on Mar 26 on soft sales results. Shares of this Zacks Rank #3 (Hold) company have declined 14.2% in the past three months compared with the industry’s 2.2% drop.
GameStop Corp. Price, Consensus and EPS Surprise
GameStop Corp. price-consensus-eps-surprise-chart | GameStop Corp. Quote
Q4 in Details
GameStop posted adjusted earnings per share of 22 cents in fourth-quarter fiscal 2023 compared with the Zacks Consensus Estimate of 25 cents per share. The company reported an adjusted earnings per share of 16 cents in the prior year quarter.
GME reported net sales of $1,793.6 million, which missed the consensus estimate of $2,000 million. Also, the metric decreased 19.4% from $2,226.4 million reported in the year-ago fiscal quarter. Lower sales across all the categories contributed to soft sales.
By sales mix, hardware and accessories sales fell 11.9% to $1.09 billion from $1.24 billion reported in the year-ago quarter. Software sales were $465.3 million, down 30.6% from $670.4 million in the year-ago quarter. Sales in the collectibles unit declined 25.4% to $233.7 million compared with $313.2 million reported in the year-ago quarter.
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Margins
Gross profit decreased 16.1% to $419.2 million from $499.8 million in the year-ago fiscal quarter. We note that gross margin expanded 100 basis points (bps) year over year to 23.4% in the quarter under review.
Adjusted selling, general and administrative (SG&A) expenses declined 20.8% to $358.9 million from $452.9 million reported in the year-ago quarter. As a percentage of net sales, SG&A expenses were 20%, down 30 bps from 20.3% reported in the year-ago period.
The company’s adjusted operating income was $60.3 million in the reported quarter. It had reported an adjusted operating income of $46.9 million in the prior-year fiscal period. We note that the adjusted operating margin increased 130 bps year over year to 3.4% in the fiscal fourth quarter.
Adjusted EBITDA was $88 million against an adjusted EBITDA of $82.5 million in the prior-year quarter. Adjusted EBITDA margin increased 120 bps year over year to 4.9%.
Other Financial Aspects
GameStop ended the fiscal fourth quarter with cash and cash equivalents of $921.7 million, net long-term debt of $17.7 million and stockholders’ equity of $1.34 billion. Net merchandise inventory was $632.5 million at the end of the reported quarter compared with $682.9 million at the close of the same quarter last year.
During the 53-week period that ended Feb 3, 2024, the company used cash flow from operations of $203.7 million against an outflow of $108.2 million during the same period last year. Free cash flow during the same period was a negative $238.6 million. Capital expenditures in the 53 weeks amounted to $34.9 million.
Key Picks
A few better-ranked stocks are Deckers Outdoor Corporation DECK, American Eagle Outfitters Inc. AEO and Abercrombie & Fitch Co. ANF.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.7% and 15.8% from the year-ago period’s reported figures. DECK has a trailing four-quarter average earnings surprise of 32.1%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. The company flaunts a Zacks Rank #1 at present.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3%, respectively, from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank #1. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6%, respectively, from the year-ago period’s reported figures.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
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GameStop Corp. (GME) : Free Stock Analysis Report
