GameStop annual income down by $300m due to fourth quarter "asset impairment"
Sales up 7.2 per cent to $9.2 billion with net income of $34.7 million
US retail giant GameStop has posted strong returns in its latest financial report, but net income is down by more than $300 million due to a Q4 asset impairment.
The impairment, driven primarily by a change in AT&T's dealer compensation structure, resulted in an operating loss of $359.8 million in the company's technology brands operation.
However, GameStop enjoyed a global sales increase of 7.2 per cent for the year, generating a total revenue of $9.2 billion, with a net income of $34.7 million.
Led by demand for the Nintendo Switch, new hardware sales were up by 28.3 per cent over the year prior, reaching $1.7 billion. Collectables and merchandise also performed well, increasing 28.8 per cent to $636.2 million.
Digital sales and non-GAAP digital receipts were up 13.8 per cent and 7.1 per cent respectively, excluding 2016 revenues from Kongregate which was sold in July 2017.
Reported digital sales increased 4.5 per cent to $189.2 million, while non-GAAP digital receipts increased 5.2 per cent to $1.2 billion.
Consistent with expectations, the retailer said it saw a decline in pre-owned sales of 4.6% down to $2.1 billion.
Excluding asset impairment and other charges, GameStop's adjusted net income for 2017 was $338.6 million, compared to $390.9 million the year prior.
Turning to the Q4 results, despite posting a net loss of $105.9 million - compared to a net income of $208.7 million the year prior - global sales for the period rose 15 per cent to $3.5 billion.
New hardware sales saw a year-on-year increase of 44 per cent to $844 million, while software sales rose by 12.4 per cent to $1.04 billion.
Collectables and merchandise sales for the period increased 22.8 per cent to $260.8 million. However, tech brand sale decreased 14.2 per cent to $219.7 million.
In a statement, GameStop CEO Mike Mauler revealed the company's strategy for the coming year.
"While we had a solid performance in 2017, there are still many areas to improve that will drive future profitability," he said. "We have three core profitable businesses; video games, collectables, and technology brands.
"Moving forward over the next year, we plan to pause on investing in additional new businesses or acquisitions and focus on the fundamentals of improving the businesses that we already have.
"I believe focusing on the basics of retail operational excellence across the organisation will maximise our free cash flow, improve our performance and, ultimately, deliver returns for our shareholders."