GameStop has reported earnings for the quarter that ended on August 3, and, to the surprise of some, the retailer has turned a profit. Despite that, GameStop’s stock price is sliding–it’s down 15% today–due to a downturn in sales and ongoing uncertainty about how GameStop can stay relevant and healthy long term.
For the quarter, GameStop sales slid from $1.164 billion to $798 million. Despite that, GameStop posted a net income of $14.8 million, which was a marked improvement over the company’s $2.8 million loss for the same period a year ago.
GameStop’s selling, general, and administrative (SG&A) costs for the period amounted to $270.8 million, compared to $322.5 million during the same period last year.
GameStop said the decline in SG&A costs were primarily attributable to the company’s ongoing cost-reduction plan, which has included layoffs and scale-downs in multiple areas of the business, like the closure of Game Informer after 33 years. GameStop also saved money in the past quarter by closing stores.
The bulk of GameStop’s revenue came from hardware and accessories, which came in at $451.2 million (down from $597 million), with software ($207.7 million, down from $397 million), and collectibles ($139.4 million, down from $169.8 million) making up the rest.
At the end of the quarter, GameStop had $4.204 billion in cash and cash equivalents on hand.
Despite GameStop turning a profit, GameStop’s stock price is down significantly following the announcement of the results, presumably due in part to the sliding sales numbers and a lack of faith from investors that the company can turn things around.
GameStop said part of its plan for the future is to make sure the company is a “fast and convenient” place for people to shop. GameStop said it will do this by increasing inventory, fulfilling orders more quickly, and improving customer service. GameStop also noted that achieving profitability is another one of its goals, following years of losses–and the company has now achieved that. Third, GameStop said said the GameStop name has “strong household brand recognition” and a large network of physical stores, and this could be a key driver for growth in the future.
“We believe these efforts are important aspects of our continued business to enable long-term value creation for our shareholder,” the company said.
Finally, GameStop said it plans to close a large number of stores going forward as the company aims to “eliminate redundancies and underperforming assets.”
“While this review is ongoing and a specific set of stores has not been identified for closure, we anticipate that it may result in the closure of a larger number of stores than we have closed in the past few years,” GameStop said.
For context, GameStop said in March this year that it closed 287 stores worldwide in the past fiscal year and now has 4,169 stores.
Following the “short-squeeze” situation in 2021 that saw GameStop’s stock price massively surge, GameStop’s new management, including CEO Ryan Cohen, announced a plan to make GameStop profitable again, something that the company has now achieved. GameStop was also planning a push into the NFT and crypto markets, but those didn’t pan out and the company’s investments in those spaces have come to an end.
Despite GameStop’s share price sliding this week, GameStop’s stock price remains up more than 1,700% in the past five years.
