Mar 26, 2016 10:56 AM EDT

Largest Video Seller GameStop Revenues Lower Than Projected; Shares Drop

GameStop, the biggest video game retailer in the United States, has projected its first-quarter revenue below the estimates of financial analysts. The company blamed sluggish hardware sales and the lack of major videogame releases.

Company shares dropped 5.6 percent at $28.55 on Thursday in after-market trading. Shares have declined approximately 8.3 percent earlier.

During the past four years, sales of fresh videogame releases fell significantly but the retailer offset its dismal sales performance by venturing into new businesses. Its new investments are poured into marketing cellphones and allocating store space to action figures and saleable collectible items.

The company's management revealed in a recent post-earnings call with analysts, that GameStop is right now in a sort of transition phase. This year, the video game retailer is expecting non-physical gaming items like collectibles and digital content.

Among other things, these items will account for 25 percent of the company's total operating revenues. The retailer hopes that the share of these products will increase to 50 percent by 2019.

In addition, company management is also expecting that they will experience further sales decline in hardware and new software during the present fiscal year. With regards to the first quarter sales drop, the main cause is fewer games released during the period compared to last year, according to company management.

The video game retailers said that the company expects overall sales to go down between 4 and 7 percent in the present quarter. This translates into earnings from $1.92 to $1.98 billion.

According to Thomas Reuters I/B/E/S, financial analysts have projected GameStop revenue of $2.09 billion. The retailer also projects same-store sales to decline 7 to 9 percent during the first quarter.

During the call, the video retailer also emphasized that while GameStop is maintaining its secondhand business, it is no longer tied to the overall health and viability of the company.

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