GameStop reports unexpected profit despite fourth-straight quarter of declining sales
GameStop Corp. reported a fourth consecutive quarter of falling sales, though the video-game retailer reported an unexpected profit.
Revenue fell 31% from a year earlier to $798 million for the second quarter ended Aug. 3, the company said in a statement Tuesday. That compares with the $895.5 million average of two analysts’ estimates, according to data compiled by Bloomberg. Net income was $14.8 million, compared with a loss of $2.8 million a year ago.
GameStop, which is led by Chief Executive Officer Ryan Cohen, has yet to detail a clear strategy for growth as its brick-and-mortar retail business struggles to adapt to the shifts in gaming from physical disks to software downloads. The company hasn’t held an earnings call or given financial guidance in several quarters, leaving investors largely in the dark.
“The company continues to face a near insurmountable barrier to its planned return to growth,” Wedbush analysts led by Michael Pachter wrote in a note to investors. The company has “a total lack of any strategy to enter new categories with growth potential.”
Sales of hardware, software and collectibles all fell from the prior year. The shares slid about 1% in extended trading in New York after closing at $23.45.
GameStop shares continue to be buffeted largely by the “meme-stock” trading community. In June, the company raised $2.14 billion after stock influencer Keith Gill, known as “Roaring Kitty,” returned to YouTube, inspiring a stock rally. The Grapevine, Texas-based company has a market cap of about $10 billion.
Cohen told investors in brief remarks at the company’s shareholder meeting in June that he would avoid the share trading “hype” and focus on achieving profitability. “Revenue without profits and prospects of future cash flow are of no value to shareholders,” he said at the time. His plan to achieve that was to operate a small network of stores with higher-value items, he said.
