GameStop slides after missing on earnings and saying it's still looking into a sale

Ethan Miller/Getty ImagesGameStop employee Randi Taber (L) sells a copy of ‘Call of Duty: Modern Warfare 3′ to Chris Fowler of Nevada during a launch event for the highly anticipated video game at a GameStop Corp. store November 7, 2011 in North Las Vegas, Nevada. Video game publisher Activision released the eighth instalment in the ”Call of Duty’ franchise at midnight on November 8.

GameStop shares declined early Friday after second-quarter results beat on revenue but missed on earnings. It also reiterated that it is engaging with third parties to consider a potential sale of the company.

The video-game retailer posted adjusted earnings of 0.05 a share, missing the Wall Street consensus by three cents, according to Bloomberg data. Sales totaled $US1.65 billion, down from last year’s $US1.69 billion, but that still beat the $US1.62 billion estimate. Meanwhile comparable sales dropped 0.5%, beating the 3.7% decrease that was projected.

“As our teams prepare for a busy and exciting holiday period, our board of directors, with the support of our financial and legal advisors, continues to conduct a comprehensive review of strategic and financial alternatives, including, but not limited to, a potential sale of the company,” said executive chairman Dan DeMatteo in the press release.

There can be no assurance that the board’s review will result in any transaction, GameStop said, adding that it did not intend to discuss further developments related to its review unless it was appropriate.

Looking ahead, GameStop reiterated its previous annual earnings-per-share guidance of between $US3.00 and $US3.35. Analysts were expecting $US3.11 per share.

“GME second report reinforced our view that there is residual value in the model with sales and comparables beating estimates,” Jefferies analyst Stephanie Wissink said in a note sent out to clients after the results that reiterated her $US18 price target and maintained her “buy” rating.

“Earnings per share came in slightly below due to lower gross margins – mix, hardware promos, and price positioning during & post TRU bankruptcy. The management validated an exploratory process is ongoing and AT&T dead weight has neutralized. We are optimistic that a strong third quarter will help to shift sentiment, alongside takeout prospects.”

GameStop shares are down 16.5% this year through Thursday.

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