GameStop reported disappointing sales results and a wider-than-expected net loss during for its fiscal second quarter, news that sent stock in the struggling retailer lower in after-market trading.
The company said its net loss was $113.3 million, or $1.71 per share. Wall Street’s consensus estimate called for a loss of $1.23 a share, according to FactSet. Sales of $942 million were down 26.7% year-over-year, and missed the $1.02 billion mark set by analysts.
Comparable-store sales fell 12.7%, when adjusted for fewer store operating days due to Covid-19 closures. The company’s e-commerce sales soared 800%, as shoppers shifted to digital offerings.
GameStop’s sales were expected to be down this year even before the pandemic upended retailers and the rest of the economy.
New consoles from Microsoft and Sony are set to launch in November. That is bad news in the short term because sales of videogames and equipment have historically fallen in the months ahead of new consoles, before surging back in the months following release.
The new generation of gear will bring a heightened emphasis on digital downloads and cloud gaming subscription plans. Sony and Microsoft are both releasing cheaper versions of their systems that don’t have disc drives. That is bad for GameStop’s sales of physical discs, as well as its business buying and reselling used games.
CEO George Sherman said in the earnings release that the company reduced selling, general, and administrative expenses by $133.7 million during the quarter. The company had $735.1 million in cash on Aug 1. It also reduced inventory by 50% year-over-year. That helped drive free cash flow of $181.9 million, Sherman said.
“We believe the actions we are taking to optimize the core operations of our business by increasing efficiencies and creating a frictionless digital ecosystem to serve our customers, wherever and whenever they choose to shop, are enabling us to navigate the COVID-19 environment while positioning us well for the launch of the next generation of consoles,” Sherman added.
GameStop stock was down 11.7% to $6.49 in after-market trading. The stock had rallied a bit in the past month after a disclosure that Chewy co-founder Ryan Cohen’s RC Ventures increased its stake to 9.6%. Even with the current drop, the stock is 152.5% higher than its one-year low of $2.57.
Write to Connor Smith at connor.smith@barrons.com
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September 10, 2020 at 04:21AM
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GameStop Stock Drops as Results Fall Short - Barron's
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