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GameStop blames sales dip on "weak" game category

Specialty retailer sees game revenues down across the board as collectibles and mobile tech business each up more than 50% year-over-year

Last year was a disappointing one for GameStop. The specialty retailer reported numbers for the fiscal year ended January 28 today, and they fell far short of initial expectations.

Coming into the year, GameStop projected a 2016 campaign with revenues up 3% and net profits of up to $423 million. However, they wound up with revenues down 8% to $8.61 billion and net profits down 12% to $353.2 million.

"GameStop's transformation continued to take hold in 2016, as our non-gaming businesses drove gross margin expansion and significantly contributed to our profits," GameStop CEO Paul Raines said. "Meanwhile, the video game category was weak, particularly in the back half of 2016, as the console cycle ages."

Every aspect of GameStop's gaming business shrank for the year, from new systems and games to pre-owned goods, accessories, and even digital sales. Fortunately for the company, its efforts to diversify into adjacent markets helped offset some of those sagging revenues. Its Technology Brands division--which includes AT&T affiliated chains Spring Mobile and Cricket Wireless as well as Apple-certified retailer Simply Mac--grew 52% to $814 million, while its Collectibles business (including ThinkGeek) sparked revenues up 59% to $494.1 million.

Unfortunately for GameStop, the company isn't expecting much of a rebound. For the current fiscal year, GameStop projects revenues within 2% of last year's figure (up or down), with net income essentially flat if it comes in at the high end of its range, between $320 million and $354 million. Additionally, GameStop will no longer provide quarterly earnings per share guidance or same-store sales guidance, stating that omitting such numbers "will reduce investor distraction as we continue to diversify the company and seek to maximize long-term shareholder value."

"Looking at 2017, Technology Brands and Collectibles are expected to generate another year of strong growth, and new hardware innovation in the video game category looks promising," Raines said. "As we continue our transformation plan, we will also be focused on managing [selling, general and administrative expenses] spend, rationalizing our global store portfolio, and maximizing free cash flow generation to drive shareholder value."

According to its corporate site, GameStop currently operates more than 7,500 stores in 14 countries across North America, Europe, and Australia.

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