GameStop Lowers Sales Expectations After October Games Underperform

GameStop will officially report earnings for its latest quarter on November 22, but ahead of that, the company today announced preliminary results for its fiscal Q3 (ended October 31)--and things aren't looking up.

The retailer said it expects revenue for the period to be around $2 billion, which would mean store sales would be down 6-7 percent, which is worse than the previously forecasted range of down 2 percent to up 1 percent that GameStop announced earlier this year. This new estimate is based on "sales trends of recently released new video games as well as the current sell-through rate of new video game hardware."

GameStop CEO Paul Raines said new October game releases "underperformed" the company's expectations. Despite this, Raines said GameStop gained marketshare overall. GameStop's Technology Brands and Collectibles divisions "continue to grow rapidly," but their gains were not enough to offset the downturn in video game sales during the period.

"We remain excited about the innovation coming into the video game category over the next twelve months, including virtual reality, the Sony PlayStation 4 Pro, the Nintendo Switch, and Microsoft's Scorpio," Raines said. "We also remain confident that our diversification strategy will provide long-term growth and shareholder value."

GameStop did not name any October new releases in its report, nor did it offer any information on the margin by which sales underperformed. Some high-profile games released during the month included Gears of War 4, Mafia III, Battlefield 1, Titanfall 2, and WWE 2K17. We have followed up with GameStop in an attempt to get more details.

In the wake of the lower-than-expected sales forecast, GameStop adjusted its full-year sales expectations downward. Earnings-per-share are now expected to range from $3.65 to $3.80, with comparable store sales falling in the range of -9.5 percent to -6.5 percent. This compares to the previously forecasted earnings-per-share numbers of $3.90 to $4.05, with comparable store sales of -4.5 percent to -1.5 percent.

Last year, GameStop reported that Halo 5: Guardians, Star Wars Battlefront, and Assassin's Creed Syndicate all performed below the company's expectations.

Electronic Arts said yesterday during its earnings call that it believes the download rate for PlayStation 4 and Xbox One games is now 30 percent across the industry. The rise in popularity of downloading games at home would conceivably hurt GameStop's physical games business.

For what it's worth, game sales overall have been down in the United States, so GameStop may not be the only retailer affected.

Check back with GameSpot on November 22 to learn more about GameStop's business outlook.