GameStop sales climb along with shares even as loss widens

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GameStop Corp. sales rose as more people returned to its stores last quarter, but its loss widened, damping investors’ hopes for signs of a turnaround for the videogame retailer.

The Grapevine, Texas-based company posted on Wednesday $1.38 billion in net sales for the quarter through April 30, up from $1.28 billion a year earlier. On an adjusted basis, the retailer reported a loss of $2.08 a share, compared with a loss of 45 cents a share over the same period a year ago. Three analysts polled by FactSet expected net sales of $1.32 billion and an adjusted loss of $1.45 a share.

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GameStop said it expanded its inventory to $917.6 million from $570.9 million a year earlier and ended the period with cash and cash equivalents of $1.04 billion. While hardware sales declined, that slide was offset by growth in sales of software and collectibles, the company said.

GameStop store on 14th Street at Union Square, in New York City. (AP Photo/John Minchillo) (AP Photo/John Minchillo / AP Newsroom)

Last year, GameStop was at the center of a monthslong, social-media-fueled trading frenzy. The company revamped its leadership to help it diversify its business and return to profitability, but the results so far haven’t been as dramatic as the rally in the company's stock price early last year.

The company’s shares have plunged more than 50% over the last 12 months. The Nasdaq Composite Index fell around 13% over the same period.

Shares rose around 3% in early after-hours trading after the company announced results Wednesday.

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Last June, GameStop overhauled its executive team and board of directors in an effort to reverse years of languishing sales and strategic missteps. The company named two Amazon.com Inc. veterans as its chief executive and chief financial officer, and shareholders voted activist investor Ryan Cohen as chairman.

The videogame retailer has struggled to turn a profit because many gamers have moved to downloading and streaming games over the internet, instead of buying the hard copies GameStop specializes in selling. In addition, publishers have been releasing more free games that generate revenue from sales of virtual goods.

TickerSecurityLastChangeChange %
GMEGAMESTOP CORP.119.56-4.94-3.97%

Under Mr. Cohen’s leadership, GameStop has been working to turn itself around in part by investing in efforts to improve and boost its ecommerce business. The company also launched a digital wallet that it said would enable transactions on a marketplace it is building for gamers and others.to buy, sell and trade nonfungible tokens, or NFTs.

Wedbush analyst Michael Pachter has been skeptical of the company’s NFT plans, saying in a recent note to investors that major developers of console and mobile games are unlikely to allow third parties such as GameStop to capture a meaningful portion of consumer spending on digital goods. He also expects sales to continue to be squeezed by falling demand for physical software and the struggle to procure the gaming consoles it sells in its stores due to the supply-chain crunch.

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"These headwinds, combined with high levels of spending related to its NFT efforts and other cost centers, may trigger significant cash burn for much of the next year or longer," Mr. Pachter said.

Write to Sarah E. Needleman at [email protected]

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