(Reuters) - GameStop Corp (NYSE:GME) shares plunged 26% on Tuesday after the video games retailer halted its quarterly dividend and reported a 13.3% fall in first-quarter revenue that missed analysts' estimates on the back of slowing sales of video games and consoles at its stores.
Shares of the company fell to $5.88 in extended trading, and if losses hold, they are set to open trading at its lowest level since 2003.
Chief Financial Officer Rob Lloyd said the consumers were postponing their purchase of consoles, as the current models PS4 and Xbox One console are in late stages, and they are awaiting new versions from Sony Corp (T:6758) and Microsoft Corp (NASDAQ:MSFT).
"The last time we experienced the console transition period (was) when Sony and Microsoft announced new generation consoles," Lloyd said.
The gaming retailer has been struggling with shrinking profits as consumers shift to downloadable videogames instead of buying physical versions from stores.
GameStop also faces a major threat from the rising advent of game streaming, with technology giants like Alphabet (NASDAQ:GOOGL) Inc's Google, Microsoft and others getting into the still nascent space.
"While GME said the dividend elimination would provide flexibility to drive value creation for shareholders and transform GME for the future, Apr-Q results and intensifying competition from Apple (NASDAQ:AAPL) Arcade and Alphabet's Stadia suggest it may be game over," CFRA Research analyst Camilla Yanushevsky said.
GameStop said it would use the capital meant for dividend payments towards debt reduction and investing in driving margin improvement through better sourcing, pricing and promotion activities.
The stoppage of dividend will save about $157 million per annum, besides helping in cutting its nearly $500 million debt burden.
New hardware sales plunged 35%, with an increase in Nintendo Switch sales more than offset by a decline in Microsoft Corp's Xbox One and Sony Corp's PlayStation 4 console sales, GameStop said.
The company forecast comparable sales for the full-year to fall between 5% and 10%, while analysts were expecting a 4.9% drop in same-store sales.
GameStop, which saw several changes in management since Chief Executive Officer J. Paul Raines passed away last March, has been cutting costs to remodel itself in the face of a changing retail landscape.
Two months ago, the company named retail industry veteran George Sherman as chief executive officer, its fifth CEO in just over a year, and it named James Bell as its chief financial officer last week.
Sales of pre-owned products fell 20.3% to $395.3 million in the first quarter, while sales from its collectibles business rose 10.5% to $157.3 million.
GameStop's net income fell to $6.8 million, or 7 cents per share, in the quarter ended May 4, from $28.2 million, or 28 cents per share, a year earlier.
Net sales declined to $1.55 billion from $1.79 billion.
Analysts on average had expected a loss of 3 cents per share on revenue of $1.64 billion, according to IBES data from Refinitiv.