GameStop aims to increase profitability by cutting costs and moving beyond video games.
GameStop shares jumped on Wednesday after the video game retailer posted a quarterly profit for the first time in two years. The company also reported a surge in sales above Wall Street expectations, with its CEO claiming GameStop is in a “much healthier” business position compared to the start of 2021.
GameStop Earned $48.2M in Q4 2022
On Tuesday, GameStop posted its earnings report for the latest quarter of 2022. The company reported a quarterly profit after two years of earnings in the red, finishing its latest fiscal year on a high note thanks to the holiday season.
More specifically, the video game retailer reported a $48.2 million net profit in Q4 2022, compared to a net loss of $147.5 million in Q4 2021. The company’s net sales dropped slightly to $2.23 billion from $2.25 billion in last year’s fourth quarter.
The company posted an adjusted profit of 16 cents per share for Q4 2022, beating Wall Street expectations of negative 13 cents. The surprise profit led to a sharp jump in GEM shares, which gained 48% in Tuesday’s extended session.
Moreover, GameStop shares closed Wednesday up by 35.24%, trading at $23.87 per share. The recent rally has also helped the video game retailer bring its year-to-date (YTD) performance to 29.31%.
GameStop has been working to steer itself back to profitability by cutting costs. The company has reportedly launched a series of corporate layoffs to reach its profitability and growth goals.
Courtesy of such measures to cut costs, selling, general and administrative expenses came in at $453.4 million for the latest quarter of 2022 or 20.4% of sales. In comparison, expenditures were $538.9 million, or 23.9% of sales, in the year-earlier period.
CEO Says GameStop is Much Healthier Now
GameStop CEO Matt Furlong said at the company’s investor call after the results that the company is “a much healthier business today than it was at the start of 2021.”
He added that the company is “aggressively focused on year-over-year profitability improvement while still pursuing pragmatic long-term growth.” This includes further cuts, particularly in its European markets, where it has already been reducing its number of retail stores.
The video game retailer also reduced its inventory to $682.9 million at the close of the quarter, compared with $915 million at the close of the fourth quarter of 2022. That reflected its “ongoing focus on maintaining a healthy inventory position,” Furlong said.
However, the one-time meme stock might have difficulty returning to profitability, considering the ongoing decline in used-game sales. One GameStop manager recently claimed that the retail chain is not performing well. “No one comes in anymore,” the manager said.
In response, GameStop is closing stores and moving beyond video games as it attempts a turnaround. Specifically, the company has launched an NFT marketplace and a suite of Web3 tools to digitize its business further.
Nevertheless, the GameStop stock is currently down 2.35% in pre-market trading.
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Originally Posted March 23, 2023 – CEO Says GameStop is a “Much Healthier Business” Today as Shares Up 29% YTD
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