Electronics retailers are being dragged into negative territory Thursday morning after GameStop Corp. (GME) reported a decline in second quarter margins.
Shares of GameStop are posting one of the biggest losses within the sector, dropping about 5%. Meanwhile, HH Gregg Inc. (HGG), Best Buy Inc. (BBY) and RadioShack Corp. (RSH) are also on the downside.
Around 11:15 am Eastern Time, GameStop stock was down $2.55 to $40.97 a share, while HH Gregg shares were down 19 cents at $9.50. Best Buy shares were down 54 cents at $43.71 and RadioShack stock was down 19 cents at $18.15.
Before the opening bell on Thursday, GameStop reported a 162% jump in its second quarter profit, as strong sales of new videogame software drove revenues up 34.8%. The company also raised its earnings outlook for full-year 2008 and provided earnings guidance for the third and fourth quarters.
Second quarter earnings for GameStop surged up to $57.16 million or $0.34 per share from $21.81 million or $0.13 per share in the year-ago quarter.
On average, fourteen analysts polled by First Call/Thomson Financial expected the company to earn $0.28 per share for the quarter.
Quarterly sales surged up 34.8% to $1.80 billion from $1.34 billion in the prior-year quarter, better than Wall Street estimates of $1.70 billion.
However, the company's gross profit as a percentage of sales fell from the prior year to 26.8%.
Comparable sales for the quarter rose 20% as new video game software sales grew 43%. Operating earnings nearly doubled from the same quarter last year to $100.07 million.
Looking ahead to the third quarter, the company anticipates earnings in a range of $0.36 to $0.38 per share and comparable store sales in a range from flat to plus 2%. The third quarter earnings forecast is in line with current Wall Street expectation of $0.36 per share.
For the fourth quarter, GameStop expects earnings in the range of $1.37 to $1.40 per share and comparable sales growth in the range of 8% to 10%.
For full-year 2008, the company now expects earnings in the range of $2.45 to $2.50 per share, up from its prior guidance range of $2.30 to $2.39 per share.
Earlier this week, Circuit City Stores, Inc. (CC) announced that it appointed director James Marcum as vice chairman. In this executive officer position, Marcum will play an important role in leading the efforts to accelerate the pace of the company's turnaround.
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