Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



GameStop Steps Up Its Game

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

GameStop (NYSE: GME  ) may be turning its head in the right direction, but it's still going backward.

The leading video game retailer took some more steps back in its latest quarter.

Sales slipped 11% to $1.38 billion, fueled by a 10.7% slide in consolidated comparable-store sales. Profitability was cut in half to $10.5 million, or $0.09 a share.

However, the chain's stock still opened sharply higher today because the market was holding out for something worse.

Wall Street was settling for net income of just $0.04 a share on $1.36 billion in sales. GameStop's own guidance three months ago was calling for comps to slide by 12% to 16%. This morning's report may not be an absolute victory, but it's clearly a relative win over expectations.

This may also be the end of the retreat for GameStop's fundamentals, at least in the near term.

With Take-Two Interactive's (NASDAQ: TTWO  ) long-awaited Grand Theft Auto V hitting the market next month, GameStop's eyeing a profit of $0.50 a share to $0.55 a share this quarter with comps clocking in 11% to 15% higher. Analysts were betting on a profit of just $0.35 a share on lower global sales.

Things should also get even better during the holiday quarter for GameStop. Activision Blizzard's (NASDAQ: ATVI  ) Call of Duty: Ghosts hits stores on Nov. 5, and that also happens to be the same month that Microsoft (NASDAQ: MSFT  ) and Sony (NYSE: SNE  ) will introduce their new consoles.

GameStop is revealing positive preorders for Microsoft's Xbox One and Sony's PS4. The 6,505-store chain also notes that it's receiving a larger allocation of the new consoles at the time of launch. With the two systems hitting the market so close to each other, it was a safe bet that they weren't going to try to limit the initial supply to drum up demand. That could be a losing bet this holiday season. However, it's still encouraging to know that GameStop will be selling a lot of the new systems for November's launch.

GameStop now sees comps clocking in between negative 3.5% and 1.5% for the entire year. That may not seem so great, but it's the second quarter in a row in which the retailer has raised its view. It's a welcome contrast to last year, when it lowered the midpoint of its same-store sales guidance four times.

GameStop's also raising its earnings outlook, though that is at least partly the result of its ambitious share buyback program. GameStop's now targeting per-share income to come in between $3 and $3.20, even though Wall Street's already perched at the higher end of that revised range by forecasting a profit of $3.15 a share ahead of the report.

There's going to be a lot of heavy lifting at the hands of Take-Two, Activision Blizzard, Microsoft, and Sony here to justify GameStop's stock having nearly tripled over the past year, but until GameStop reverts back to its 2012 form and begins whacking away at its own guidance, it's hard to deny the chain's positive momentum.

Check out three more retailers that are also getting it done
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2606397, ~/Articles/ArticleHandler.aspx, 9/25/2016 6:54:23 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:01 PM
GME $28.19 Down -0.08 -0.28%
GameStop CAPS Rating: **
ATVI $44.36 Down -0.15 -0.34%
Activision Blizzar… CAPS Rating: *****
MSFT $57.43 Down -0.39 -0.67%
Microsoft CAPS Rating: ****
SNE $33.60 Down -0.31 -0.91%
Sony CAPS Rating: ***
TTWO $46.32 Up +0.45 +0.98%
Take-Two Interacti… CAPS Rating: ****