GameStop Corp saw its stock price plummet the most in the past 11 years after the retailer of video games cut its forecast for earnings due to sales being lower than anticipated for games and a lower profit margin from its consoles during the holiday shopping season.
Shares were down by 18% by noontime on Tuesday to $37.35 after falling as low as $36.20, its biggest intraday fall since December of 2002. Last year the company’s stock was up 96%.
Rob Lloyd the CFO of GameStop said the hardware category was driven higher by the demand for the new PlayStation 4 from Sony Corp. and the Xbox One from Microsoft, which resulted in a profit margin that was lower.
Games sales were weaker than the company’s most cautious expectations, said a Wall Street analyst. A weakness in new software is said to be a cyclical issue that could recover later during 2014, as the new generation console’s base of users continues its growth.
The stumble by GameStop comes at a time when the video-game industry positions itself to take advantage with the newest consoles.
The video game retailer along with game publishers and console producers have been able to weather a drop for two years in spending by consumers as play on mobile phones and Internet social networks increased in popularity.
Profit for the fourth quarter at most will be $1.95 per share, reduced from the $2.14 earlier projected profit, said the company. Analysts had projected profit of $2.14.
Same-store holiday sales were up 10% amidst demand for new consoles, said the company that is based in Grapevine, Texas in a corporate statement. Total sales globally were up 9.3% to end at $3.15 billion.
Profit for the full year is expected to be at most $3.06 per share, which it reduced from $3.25 the previous forecast.
GameStop said it had sold for as many as 1.8 million of the 7.2 million Xbox One and PlayStation 4 consoles that were sold worldwide up to December 28.