Factors Likely to Decide GameStop's (GME) Fate in Q1 Earnings
GameStop Corp. GME is likely to register a decline in the top line when it reports first-quarter fiscal 2020 numbers. The Zacks Consensus Estimate for revenues is pegged at $1,052 million, indicating a decline of 32% from the prior-year reported figure.
Further, the Zacks Consensus Estimate for first-quarter bottom line slipped to a loss of 73 cents from a loss of 63 cents 60 days ago. The company had recorded earnings of 7 cents a share in the year-ago period. Notably, this Grapevine, TX-based company’s bottom line outperformed the Zacks Consensus Estimate in the last reported quarter.
Key Factors to Note
Analysts pointed that the outbreak of novel coronavirus is likely to have impacted GameStop’s top-line performance. Management in an earlier release had informed that the company closed its stores on Mar 22. However, two-thirds of such stores were functioning through curbside pick-up, and the company retained more than 90% of its planned sales volumes through omni-channel fulfillment.
Management did notify that for the nine weeks ending Apr 4, GameStop’s comparable store sales fell 23% year over year, reflecting the impact of store closures through March. However, for the March period ending on the 21st of the month, comparable U.S. store sales increased roughly 3% on higher demand for products that people needed to work, learn or play from home.
Again, for the five weeks period in fiscal March, the company’s Australia unit recorded comparable store sales growth of about 64%. Moreover, the stores in the same region have been delivering strong results with comparable store sales of nearly 24% for nine weeks ended Apr 4.
It goes without saying that GameStop has been trying all means to uplift performance. The company has been exiting loss-incurring businesses and closing underperforming stores. However, it continues to witness temporary headwind related to lower current generation console hardware and software sales. This may be due to customers delaying console purchases in anticipation of new platform launches expected in the later part of 2020.
Further, to mitigate the impact of coronavirus outbreak, the company has resorted to temporary pay cut, curbing capital expenditures and lowering inventory receipts.
Undoubtedly, GameStop remains committed to containing costs, optimizing inventory and expanding high margin product categories. The company has also been focusing on enhancing store experience, expanding and redesigning PowerUp Rewards loyalty program, augmenting digital capabilities and improving engagement with vendors and partners. Further, it has been augmenting omni-channel features such as “Buy Online Pick Up In Store.”
GameStop Corp. Price, Consensus and EPS Surprise
GameStop Corp. price-consensus-eps-surprise-chart | GameStop Corp. Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict a beat for GameStop this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
GameStop has a Zacks Rank #3 but an Earnings ESP of 0.00%.
3 Stocks With Favorable Combination
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Guess GES currently has an Earnings ESP of +12.75% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Big Lots BIG presently has an Earnings ESP of +4.55% and a Zacks Rank #3.
Dave Busters Entertainment PLAY has an Earnings ESP of +14.46% and a Zacks Rank #3, at present.
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