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 as the games industry moved away from physical discs to online downloads.
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