A GameStop store operates in a mall on March 16, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
GameStop reported quarterly profit on Tuesday for the first time in two years, ending the year on high after grappling with falling sales, inventory issues and liquidity pressures.
The company’s shares are up about 45% during after-hours trading.
For the quarter ended January 28, net sales decreased slightly to $2.23 billion starting at $2.25 billion in the fourth quarter of last year. The video game retailer also posted a profit of $48.2 million, or 16 cents a share, compared to a loss of $147.5 million, or 49 cents, a year ago.
GameStop provided no financial guidance and has not provided guidance since the early days of the pandemic. The results cannot be compared to Wall Street estimates because too few analysts cover the company.
The retailer had been working to return to profitability and did so in part by cutting costs. SG&A expenses for the quarter were $453.4 million, or 20.4% of revenue, compared to $538.9 million, or 23.9% of revenue, in the prior-year period.
Speaking to investors, CEO Matt Furlong said the company is entering 2023 with further plans to cut excess costs, including in European markets where it has already exited and started to pull out of some countries. He said GameStop is also considering moving into higher-margin categories like toys.
GameStop had previously sustained some short-term meme-stock momentum, but that has since settled and the company has made strides in sizing its business by cleaning up its inventories and revising its cost structure.
The stock closed Tuesday’s trading at around $18 a share, a dramatic drop from its 52-week high of nearly $50 about a year ago.
GameStop’s turnaround plan was reinvigorated with a leadership reshuffle in 2021 that brought Furlong, an Amazon veteran, to the helm and added Ryan Cohen, Chewy founder and former activist investor of Bed Bath & Beyond, as chairman of the board. The company also laid off employees and replaced its chief financial officer.
The company has been working to revamp its real estate portfolio and go more online as the video game industry moves in that direction.
For the full fiscal year, GameStop reported revenue of $5.93 billion, down slightly from $6.01 billion in fiscal 2021, and reported higher revenue from its collectibles category, which the retailer believes will provide the company with long-term growth will bring.
Like many retailers, GameStop experienced supply chain delays that led to an inventory backlog after previously trying to meet high demand. The company is still holding inventories at $682.9 million, according to its fourth-quarter balance sheet, down from $915 million a year ago.
As part of its revival strategy, GameStop has also sought to improve its box office balance. During the quarter, its cash and cash equivalents were $1.39 billion.
In addition to handling the burdens of brick-and-mortar business, the company has also been working to find its digital identity. So far, these experiments have met with some missteps.
In September, it launched an ill-fated partnership with now-bankrupt crypto exchange FTX. The companies had planned to collaborate on e-commerce marketing, and GameStop wanted to sell FTX gift cards in its stores. Two months later GameStop tweeted that it would “wind up” this partnership and refund anyone who had purchased an FTX gift card from its stores.
The company has also been experimenting with an NFT marketplace since July. This launch came amid talk of a “crypto winter” as cryptocurrencies experienced a widespread cooldown from their 2021 rallies. The marketplace saw an initial surge in volume, but has since leveled off and may not be the ticket to a stable digital presence that the company was hoping for.
Still, speaking to investors, Furlong said the company is better positioned compared to 2021, when many “predicted we were heading for bankruptcy.”
“GameStop is a much healthier business today than it was in early 2021,” he said.