GameStop Corp. (NYSE:GME) recorded global sales of $3.48 billion for the 4Q2014, which was a decrease of 5.6% over the fourth quarter the previous year when it recorded sales of $3.68 billion. The sale was well below the expectation of $3.60 billion for the same period. The stock fell by as much as 6% in the after-hours trading. Shares closed at $38.79, around 2.5% lower in regular trade on Thursday. Net income was $235.5 million at $2.15 per share, which missed the analyst expectations of $2.17 per share.
The company previously forecasted earnings per share of $2.08 to $2.24, and same-store sales range from -5.0% to 2.0%. Sales at established stores fell 1.8% due to decreased demand for new consoles over the holiday period. The company also took a hit due to stronger dollar as a quarter of its sale is generated outside the U.S. Thompson Reuters has consensus estimate of $2.16 in EPS on $3.62 billion revenue. The sale of pre-owned games and hardware, the largest source of profit for the company also came under pressure due to gamers shifting to new consoles and mobile gaming. Overall there has been a decreasing demand for older consoles and games.
It appears that the short sellers have the company on watch. On March 13, settlement date, GameStop’s short interest rose to 24.3 million, with 5.1 days to cover compared to 21.2 million with 5.2 days to cover on the previous settlement date. Since mid-February settlement date, short interest has risen approximately by a quarter.
On the bright side of things, the company has had success, with software and posted a good 6% increase in new software sales. A 41% rise in digital sales was also recorded, driven by the popularity of downloadable content and mobile gaming apps. The company may see a sales growth in the bandwidth of 1-6% as sales of previous generation consoles slows.