GameStop shares surge after reporting first profit in two years
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Pokemon games in a GameStop store. The company struggled as the industry has moved away from physical discs to online downloads.
PHOTO: REUTERS
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NEW YORK – GameStop reported a surprise profit in the fourth quarter and beat analysts’ estimates for revenue, sending its shares soaring as much as 39 per cent in extended trading.
Net income was US$48.2 million (S$64.4 million), the first profit in two years, and reversed a loss of US$147.5 million a year earlier, the video game retailer said in a statement on Tuesday.
Earnings per share was 16 US cents, compared with a loss of 49 US cents a year earlier.
Net sales fell 1.2 per cent to US$2.23 billion in the three months ended Jan 28, but the figure was higher than analysts’ projections of US$2.18 billion.
The shares surged to a high of US$24.50 after hours in New York.
Very few analysts currently cover the so-called meme stock, which has fluctuated wildly over the past two years.
“GameStop is a much healthier business today than it was at the start of 2021,” chief executive Matt Furlong said on a call with analysts. “We have a path to full-year profitability.”
The company did not offer an outlook for 2023.
The Grapevine, Texas-based GameStop, known for its consumer electronics and gaming merchandise, has struggled with profitability
The industry was further hamstrung by supply chain constraints on consoles and a relatively light schedule of new game releases in 2022.
Video game sales in the United States dropped 5 per cent in 2022, according to industry researcher NPD Group.
One bright spot in the quarterly results was GameStop’s business selling physical collectibles, an area the company has identified as a long-term priority.
Sales in that category rose 12 per cent to US$313.2 million.
Sales in the hardware and accessories category rose 4.6 per cent to US$1.24 billion, but software sales fell 15 per cent to US$670.4 million.
Supply chain delays during the pandemic left GameStop with a backlog of inventory that had accrued during previously high demand during the early Covid-19 era. The company reduced inventory to US$682.9 million at the year end, down from US$915 million a year earlier.
Activist investor Ryan Cohen joined GameStop’s board and became its chairman in 2021, embarking on a reorganisation that included ousting the chief financial officer and company-wide layoffs.
A push into digital assets – the company announced a partnership with now-bankrupt cryptocurrency exchange FTX US last autumn, only to cancel it two months later – has so far produced mixed results.
Retail traders turned GameStop into a meme stock during the pandemic, wildly pumping up its share price based on social media chatter unrelated to the company’s fundamentals. BLOOMBERG
