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GameStop Corp. tumbled 30% at the end of the session after recording a drop in sales more abrupt than expected and halted its dividend, noting that the troubled retailer of video games is unable to maintain.
Comparable sales – a closely watched performance measure – fell 10.3% last quarter, the Grapevine-based company said on Tuesday. Analysts had estimated the decline to 6.4%, according to Consensus Metrix.
The 38-cent quarterly dividend cut will save about $ 157 million a year, the company said.
Key ideas
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Although GameStop's adjusted earnings have been better than expected, the drop in sales suggests that the company can not break out of decline. Sales of gaming equipment dropped by 35% – penalized by the decline in demand for Xbox One and PlayStation 4 – while software sales fell 4.3%.
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GameStop is committed to a cost-cutting strategy with the new Managing Director, but investors are pessimistic that its core business, selling games in traditional stores, can resume its course. Even before the fall on Tuesday, stocks were down 38% this year.
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Earlier this year, Apple Inc. and Google announced the launch of online gaming services. And well-established gaming companies, such as Activision Blizzard Inc., are transferring more of their titles to a free online model.
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GameStop also announced a cost reduction for its ThinkGeek collectibles business by consolidating online operations with the company's main website.
Market reaction
- GameStop fell to just $ 5.99 in extended trading on Tuesday. This has brought the stock to its lowest point in about 16 years.
Nick Turner, Bloomberg
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