GameStop ends dividends as console sales slow down; stocks fall by 26% By Reuters

(Reuters) – GameStop Corp Shares of NYSE 🙂 plunged 26% Tuesday after the video game retailer suspended its quarterly dividend and announced a 13.3% decline in sales in the first quarter.

The company's shares have fallen to $ 5.88 in prolonged trading and, if losses are maintained, they should open to trading at their lowest level since 2003.

Chief Financial Officer, Rob Lloyd, has stated that consumers are postponing the purchase of their consoles because the current PS4 and Xbox One models are in an advanced stage and are waiting for new versions of Sony Corp. (T 🙂 and Microsoft Corp (NASDAQ :).

"The last time we experienced the console transition period (that was), when Sony and Microsoft announced new generation consoles," said Lloyd.

The gaming retailer is struggling to cut profits as consumers now opt for downloadable video games instead of buying physical versions in stores.

GameStop is also facing a major threat related to the growing advent of streaming games, with tech giants like Alphabet (NASDAQ :), Google, Microsoft and others, entering the nascent space .

"While GME believed that the elimination of dividends would provide the flexibility needed to generate shareholder value and transform GME for the future, the results of Apr-Q and the intensification Apple's competition (NASDAQ 🙂 Arcade and Alphabet's Stadia suggest that it could be overtaken, "CFRA Research analyst Camilla Yanushevsky said.

GameStop said it would use dividend payout capital for debt reduction and invest in improving margins through better sourcing, pricing and promotion activities.

The dividend cut will save about $ 157 million a year, in addition to easing the debt burden by nearly $ 500 million.

Sales of new hardware plunged 35%, with Nintendo Switch sales growth more than offset by lower sales of Microsoft's Xbox One console and Sony Corp's PlayStation 4 console, GameStop said. .

The company predicted that year-over-year sales would fall between 5% and 10%, while analysts expected a 4.9% decline in same-store sales.

GameStop, which has seen several changes in management since the death of Chief Executive Officer J. Paul Raines last March, has cut costs to reflect the changing landscape of retail.

Two months ago, the company appointed retail industry veteran George Sherman to the position of general manager, his fifth CEO in just over a year, and to the appointment of James Bell as CFO last week.

Sales of second-hand goods decreased 20.3% to $ 395.3 million in the first quarter, while sales of its collectibles business increased 10%, 5% to reach 157.3 million dollars.

GameStop's net income decreased to $ 6.8 million, or 7 cents per share, for the quarter ended May 4, from $ 28.2 million, or 28 cents per share, one year earlier.

Net sales increased from $ 1.79 billion to $ 1.55 billion.

Analysts on average forecast a loss of 3 cents per share for a business turnover of $ 1.64 billion, according to Refinitiv's IBES data.