GameStop earnings fall short of expectations, but online sales offer some hope
New York (CNN Business)After several wild weeks in the spotlight, GameStop’s released financial results for the three months ended January 30 that fell short of Wall Street expectations.
Now the gaming retailer is working to turn things around: Along with the earnings report, it outlined changes aimed at transforming itself into “a customer-obsessed technology company that delights gamers,” its CEO said Tuesday on a call with investors.
GameStop (GME) reported net sales of $2.1 billion during the quarter, down 3% from the same period in the prior year and slightly below the $2.2 billion Wall Street analysts had expected, according to Refinitiv. Net income from the quarter hit $80.5 million, or $1.19 per diluted share — well below analysts’ projections but a significant improvement from the $21 million in net income it earned during its fiscal fourth quarter last year. For the full year 2020, GameStop posted a net loss of more than $215 million.
One bright spot: The gaming retailer’s global e-commerce sales increased 175%, representing 34% of the company’s total net revenue during the quarter. During the same period last year, e-commerce made up just 12% of total sales.
That bodes well for the company’s effort to transition to relying more on online sales, a move that’s especially important given that it closed a net 693 stores during 2020. It now has 4,816 stores globally.
“Our emphasis in 2021 will be on improving our e-commerce and customer experience, increasing our speed of delivery, providing superior customer service and expanding our catalogue,” CEO George Sherman said in a statement.
The company’s stock initially jumped more than 5% in after-hours trading immediately following the release, before reversing to fall more than 10%. And while corporate earnings calls are typically dry events attended mostly by analysts and reporters, GameStop’s Tuesday call hit max capacity and stopped allowing in additional listeners more than an hour before it began.
The company’s Tuesday earnings report is its first since a Reddit-fueled trading frenzy in late January took Gamestop’s stock on a rollercoaster ride — and exposed a stark divide between investors betting that the struggling retailer’s performance will worsen and those counting on a comeback.
The company’s stock quickly fell from its wild peaks during the January rally, but many investors haven’t given up. On Tuesday, GameStop shares closed down nearly 7% at $181.75, but were still more than 850% higher than where they started this year.
GameStop’s plan for the future
The earnings report also comes in the midst of an executive shakeup at GameStop that’s likely the work of Ryan Cohen, the billionaire Chewy.com founder who invested heavily in GameStop last year and joined its board in January. Many investors hope Cohen will help make the gaming retailer a more formidable competitor in the e-commerce age.