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GameStop Stocks Dip After It Slashes 2018 Earnings Outlook

Video game retailer GameStop’s shares dropped 12% postmarket Thursday after the company slashed its 2018 earnings outlook, according to CNBC.

The company just released results for its third fiscal quarter ended Nov. 3. Total global sales increased 4.8% to $2.1 billion, it said. New hardware sales increased 12.8%, driving primarily by demand for the Xbox One X and PlayStation 4 consoles. New software sales increased 10.9% thanks to a strong slate of titles that launched during the quarter, including “Marvel’s Spider-Man,” “Red Dead Redemption 2,” and “Call of Duty: Black Ops 4.” Accessories sales increased 32.6% on the strength of headset and controller sales, while pre-owned sales fell 13.4%.

But, despite its solid growth, GameStop said fourth quarter earnings are below its previous expectations and it’s updating its previous issued annual guidance for fiscal 2018.

“While our Black Friday and Cyber Monday sales were strong, we anticipate that our fourth quarter sales will skew more towards hardware than initially planned which, along with underperformance of certain titles, weakness in pre-owned and recent sales promotions, will result in fourth quarter earnings that are below our previous expectations, said GameStop chief operating officer and chief financial officer Rob Lloyd. “Importantly, we are evaluating all aspects of our business, including our store and omni-channel experience, cost structure, strategic and economic partnerships with publishing and platform partners, and relationships with customers and the services we offer to them, to enhance our business and drive growth and profitability over the long term.”

The company now expects its total sales to drop 6%, instead of the 2% it previously forecasted. It still expected comparable store sales (excluding TechBrands stores) to fall 5%.

It said it also continues to engage with third parties about a possible sale. Earlier this month, it announced it entered into a definitive agreement to sell its Spring Mobile business for $700 million. GameStop expects to finalize the sale in the fourth quarter of fiscal 2018, and said proceeds will be used to reduce its outstanding debt, fund share repurchases, and reinvest in core video game and collectibles business to drive growth.

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