GameStop Corp. (GME – Free Report) continues to see shrinking earnings due to changes in the video game industry. This Zacks Rank #5 (Strong Sell) is expected to see an 8% decline in earnings in fiscal 2018.

GameStop operates over 7,200 stores in 14 countries. It operates in digital sales including Game Informer magazine and ThinkGeek. It also has a Technology Brands segment which includes 1,400 Spring Mobile AT&T and Simply Mac stores.

Spring Mobile sells AT&T products including DIRECTV and Simply Mac sells the full line of Apple products including laptops, tablets, and smartphones.

Another Beat in the Fourth Quarter

On Mar 28, GameStop reported its fiscal fourth quarter 2017 results and beat the Zacks Consensus reporting $2.02 versus the consensus of $1.96.

It has beaten 8 out of the last 9 quarters, so the earnings beats aren’t a problem.

The fourth quarter was driven by Black Friday and holiday promotions as well as growth in the hardware business, especially with the Nintendo Switch.

Total global sales rose 15% to $3.5 billion with comparable store sales up 12.2%. The US saw 14.2% while international comparables were 8.3%.

New hardware sales was the driver, rising 44.8% thanks to demand for Nintendo Switch, while new software sales rose 12.4%.

Collectibles sales was another bright spot, as those rose 22.8%, driven by continued expansion of licensed merchandise offerings and targeted promotions during the holidays.

Pre-owned sales, however, slumped, falling 2.6%.

Fiscal 2018 Guidance Is Light

Given the tough year-over-year comparable comps of the Nintendo Switch, which launched in the first half of 2017, the company expects earnings to be substantially back half weighted.

It’s looking for a range of $3.00 to $3.35.

Comparable store sales, which don’t include the technology brands, are expected to be flat to down 5%.

Estimates Cut

Given the guidance, which was more bullish than the Zacks Consensus, it’s not surprising that the analysts have cut their estimates.

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