GameStop shares have fallen drastically in after-hours trading on Tuesday as the troubled videogame retailer saw disappointing financial results in its first quarter.
Even worse, the company announced that they would be getting rid of what has a rich quarterly dividend for shareholders. As such, shares of the company plummeted 30 percent after the news was announced.
While most quarterly financial reports try to highlight some positive aspects, GameStop’s results were fairly blunt and to the point. The company saw global sales decline by 13.3 percent, while new hardware sales fell by 35 percent.
Pre-owned sales, which used to be a staple for the game retailer, have fallen by 20.3 percent. The only upside came from accessories sales, which increased up slightly by 0.6 percent, a meager consolation for what has been a dismal quarter for the company.
Previously, the company was paying a dividend of 38 cents per share. Before today’s plunge in price, shares of GameStop were still so low that investors didn’t think that dividend payout to be sustainable or worth it in general to invest in the struggling business.
GameStop said that getting rid of the dividend will save $158 million in cash annually, which the company sorely needs to pay off it’s existing debt, which currently stands at $436 million.
“Since joining GameStop in April, I have been undertaking a thorough review of the business and working closely with the team to improve our operational and financial performance, address the challenges that have impacted our results, and execute both deliberately and with urgency. We believe we will transform the business and shape the strategy for the GameStop of the future,” said CEO George Sherman in response to the results. “This will be driven by our go-forward leadership team that is now in place, a multi-year transformation effort underway, a commitment to focusing on the core elements of our business that are meaningful to our future, and a disciplined approach to capital allocation.”
Shares of GameStop tumbled 29.7 percent at the time of writing this article, currently sitting at $5.5 per share. This also happens to be the lowest the company’s stock has been in 16 years, where shares were trading in the four-dollar range in early 2003.
GameStop has lost 90 percent of its market cap over the past 5 years as investors consider it’s business model outdated amidst online gaming distribution platforms such as Steam. When coupled with the fact that retail chains on the whole are disappearing in the face of online competitors, it’s hard to see what future GameStop could possibly have.
GameStop Company Profile
GameStop Corp is a U.S. multichannel video game, consumer electronics, and services retailer. The company operates across Europe, Canada, Australia, and the United States.
GameStop sells new and second-hand video game hardware, physical and digital video game software, and video game accessories, mainly through GameStop, EB Games, and Micromania stores and international e-commerce sites, including www.gamestop.com, www.ebgames.com.au, and www.micromania.fr.
The company has two main business segments: Video game brands and Technology brands. The technology brands segment sells wireless products and services and operates Spring Mobile managed AT&T and Cricket Wireless branded stores, along with the Simply Mac business. – Warrior Trading News
