Shares of GameStop (NYSE: GME) were bracing for a few body blows at Friday's open, a day after its earnings statement exceeded expectations.
On Thursday, the company reported 3.8% net growth in the first quarter on the back of Nintendo Switch hardware sales and said established store sales increased 2.3% despite Wall Street expectations that GameStop would post a decrease in sales.
For those scratching their heads as to the bad vibes, GameStop's net income decreased from $65.8 million in the year-ago quarter to $59 million. Also, Wall Street seems worried about the retailer's future guidance and delays of one popular game.
New hardware sales increased 24.6%, led by the highly sought after Nintendo Switch. Digital sales grew 3.0% to $44.1 million, while non-GAAP digital receipts declined 9.0% to $235.6 million. The growth in sales was primarily driven by the company’s Kongregate business.
But, in order to boost profitability, GameStop is investigating collectibles is a new business, where collectibles sales increased 39.1% to $114.5 million during the quarter.
CEO Paul Raines said a 93% increase in GameStop's omnichannel sales shows the company doesn't need as many dedicated locations to selling games as it once did. Raines adds investors can expect GameStop to continue to move away from stores that are dedicated to selling games as it shifts its focus to telecommunications stores and collectible stores, such as the GameStop ThinkGeek store in New York City.
The stock got hammered at the open Friday, falling $1.96, or 8.3%, to $21.66.
