Video game publisher THQ Inc slashed its annual earnings forecast as the company behind games such as WWE SmackDown vs Raw and Saints Row said it was facing a tough quarter ahead for sales and said its costs would rise as it spends more on marketing, sending its shares down more than 15 percent late Wednesday.
THQ shares fell 15.6 percent to $2.70 in after-hours trading.
The company had been expecting to perform better in the first half of the year but its biggest releases, notably Red Faction: Armageddon, a futuristic shooting game set on Mars, saw disappointing results in stores.
The $65 billion global video game industry is driven by major hits and companies such as THQ that invest heavily in titles made for consoles can see their earnings hurt when one game in their lineup does not deliver as expected.
Clearly, a disappointing performance, said Chief Executive Brian Farrell on a conference call with analysts, referring to the quarter's results. Red Faction Armageddon did not meet our expectations.
The company slashed its earnings outlook to a range of a loss of 30 cents per share to a gain of 10 cents per share.
It had previously forecast an EPS range of 25 cents per share to 40 cents per share for the year. Wall Street analysts were expecting earnings per share of 33 cents on average for the year.
The company maintained its revenue forecast of $925 billion to $1 billion.
Executives on the conference call stressed the company would thrive in the third quarter, when it expects to generate the most revenue and earnings per share in the company's history. The company is optimistic about the release of two new games from its proven franchises, Saints Row and WWE.
Saints Row could sell as many as 3 million to 4 million copies, said Sterne Agee analyst Arvind Bhatia.
For the three months ended June 30, the company's net loss widened to $38.45 million, or 56 cents a share, from a loss of $30.1 million, or 44 cents a share, a year earlier.
Adjusted for deferred revenue, the company posted a loss of 94 cents. This came in sharply below analysts' average estimates of a loss of 51 cents, according to Thomson Reuters I/B/E/S.
Adjusted revenue fell 12 percent to $141 million, short of the $172 million that analysts on average had expected.
(Reporting by Liana B. Baker; Editing by Richard Chang, Phil Berlowitz)