GME closed up 1%, and reported AH
GameStop Shares Fall on Surprise Loss
The videogame retailer posts an adjusted loss of $1.86 a share; analysts were expecting a profit
GameStop has been trying to become less dependent on sales in its physical stores.PHOTO: JOSE A. ALVARADO JR. FOR THE WALL STREET JOURNAL
By Sarah E. Needleman Follow
and Denny JacobFollow
Updated March 17, 2022 5:29 pm ET
GameStop Corp. GME 0.97% recorded a loss during the holiday quarter despite an increase in sales, surprising analysts who were expecting the videogame retailer to turn a profit.
GameStop has been working to turn around its business under the leadership of a revamped executive team and board of directors. The Grapevine, Texas-based company on Thursday posted $2.25 billion in net sales for the 13 weeks ended Jan. 29, above analysts’ expectations of $2.16 billion. It reported $2.12 billion in revenue for the same period last year.
GameStop said that new and expanded relationships with companies such as Lenovo Group LNVGY 2.45% and Corsair Gaming Inc. CRSR 1.23% helped to drive the growth.
On an adjusted basis, it logged a loss of $1.86 a share. Analysts polled by FactSet expected adjusted earnings of 85 cents a share.
It isn’t a good sign if the company can’t turn a profit in what is supposed to be one of its busiest times of the year, said Wedbush Securities analyst Michael Pachter. “If they can’t make money in the holiday quarter, they’re doomed,” he said.
GameStop shares were down more than 7% in after-hours trading. The stock closed Thursday at $87.70 and is down 58% over the last 12 months.
The increase in revenue comes as ongoing supply-chain constraints impact everything from gaming consoles to semiconductor chips. Cost of sales were roughly $1.88 billion, up 12%, while selling, general and administrative expenses were $538.9 million, up nearly 29%.
GameStop said it has been spending on building up its inventory to better serve its online customers.
“Increased investment in inventory reflect the company’s focus on meeting heightened demand and mitigating supply-chain headwinds,” the company said in a release.
GameStop didn’t provide an outlook for the current quarter or full fiscal year. The company suspended issuing guidance on its prospects in March 2020, citing uncertainty due to the pandemic. The company also hasn’t taken questions from analysts on its earnings calls over the past year.
The videogame retailer has struggled to turn a profit in recent years largely because many console- and computer-game players have moved to downloading games over the internet, instead of buying the hard copies that the company specializes in selling. In addition, more people have been downloading games on smartphones and tablets in recent years, while publishers have been releasing more free games that generate revenue from sales of virtual goods.
GameStop has been trying to update its business model so it is less dependent on sales in its physical stores and gets more revenue from online purchases.
In June, GameStop overhauled its executive team and board of directors. Former Amazon.com Inc. veterans Matt Furlong and Mike Recupero were named chief executive and financial officers, respectively. Shareholders also voted Chewy Inc. co-founder Ryan Cohen as chairman and elected an entirely new slate of directors.
The changes came after a monthslong, social-media-fueled trading frenzy that helped GameStop’s stock price skyrocket at the start of 2021. After reaching a peak of around $350 a share last year, the stock slid to less than $90 a share this week, amid concern that the company hasn’t done enough to reverse its fortunes.
In an attempt to improve GameStop’s prospects, Mr. Cohen has been pushing to make the company more tech-centric, such as by launching a redesigned app and adding more fulfillment centers for faster deliveries of online orders. Further, GameStop said last month that it plans to step into the trendy but unproven nonfungible-token space by launching a marketplace for buying and selling the digital certificates in partnership with an Australian blockchain startup.
GameStop said it intends to launch its NFT marketplace by the end of the second quarter.
The company posted a net loss of $147.5 million for its fiscal fourth quarter, down from year-earlier earnings of $80.5 million. On a per-share basis, the company posted a loss of $1.94, compared with a gain of $1.19 a share a year earlier.
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