GameStop tumbles as it posts slump in Q1 sales, ditches dividend

GameStop shares tumbled on Wednesday after the US video games retailer said it was ditching its dividend following a slump in first-quarter sales.

In the quarter to 4 May, total global sales fell 13.3% to $1.5bn, with comparable store sales down 10.3% - 10.2% lower in the US and 10.4% internationally. The company has taken a hit as gamers increasingly opt to download or stream rather than purchase physical video games.

GAAP net income fell to $6.8m for the quarter, or $0.07 per diluted share, down from $28.2m or $0.28 in the same period a year ago.

GameStop said it was eliminating its quarterly dividend with immediate effect as it looks to strength its balance sheet and provide increased financial flexibility. The decision is expected to preserve around $157m in cash annually.

Chief executive officer George Sherman said: "Since joining GameStop in April, I have been undertaking a thorough review of the business and working closely with the team to improve our operational and financial performance, address the challenges that have impacted our results, and execute both deliberately and with urgency.

"We believe we will transform the business and shape the strategy for the GameStop of the future. This will be driven by our go-forward leadership team that is now in place, a multi-year transformation effort underway, a commitment to focusing on the core elements of our business that are meaningful to our future, and a disciplined approach to capital allocation."

At 1605 BST, the shares were down 37% at $4.90.