Jim Stop Tuesday posted a quarterly profit for the first time in two years, ending its fiscal year on a high note in the holiday quarter after grappling with lower sales, inventory problems and cash flow pressure.
Shares of the company are up more than 45% during the after-hours trading period.
for the quarter ending in January. 28, net sales decreased slightly to $2.23 billion From $2.25 billion In the fourth quarter of last year. The video game retailer also reported a profit of $48.2 million, or 16 cents per share, compared to a loss of $147.5 million, or 49 cents, a year ago.
GameStop has not provided financial guidance and has not done so since the early days of the pandemic. Its results can’t be compared to Wall Street estimates because so few analysts cover the company.
The retailer has been working to reorient itself toward profitability, and got there in part by cutting costs. Selling, general and administrative expenses were $453.4 million for the quarter, or 20.4% of sales, compared to $538.9 million, or 23.9% of sales, in the same period last year.
A GameStop store operates at a mall on March 16, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
CEO Matt Furlong said on an investor call that the company will go into 2023 with other plans to cut excess costs including in European markets, where it’s already exited and starting to pull out of some countries. He said GameStop is also considering boosting its business in higher margin categories such as games.
GameStop previously had some short-term momentum for meme stocks, but that has since leveled off and the company has made progress in sizing its business by cleaning up inventory levels and reworking its cost structure.
The stock closed trading Tuesday at around $18 a share, down significantly from a 52-week high of around $50 nearly a year ago.
GameStop’s turnaround plan has been reinvigorated by a leadership change in 2021 that put Furlong, Amazon Veteran, at the helm Ryan Cohen added, chewy Founder and ex bed bath behind Activist investor, as Chairman of the Board. The company has also laid off employees and replaced its chief financial officer.
The retailer is revamping its real estate portfolio and increasing its online business as the video game industry heads in that direction.
For the full fiscal year, GameStop saw sales of $5.93 billion, down slightly from $6.01 billion in fiscal 2021, and saw increased revenue from the collectibles category, which the banking retailer will underpin long-term growth.
Like many retailers, GameStop has faced supply chain delays that have left it with a backlog of inventory after previously trying to meet high demand. The company is still holding on to inventory of $682.9 million, which is down from $915 million a year ago, according to its fourth-quarter balance sheet.
As part of its revival strategy, GameStop is also trying to improve its cash balance. In the quarter, cash and cash equivalents were $1.39 billion.
While managing the burdens of its physical existence, the company is also working to find its digital identity. So far, those experiences have come with some stumbles.
In September, it launched an ill-fated partnership with now-bankrupt cryptocurrency exchange FTX. The two companies planned to collaborate on e-commerce marketing and GameStop would sell FTX gift cards in their stores. Two months later, GameStop chirp that the partnership will be “terminated” and a refund will be given to anyone who purchased an FTX Gift Card in its stores.
Additionally, the company has been experimenting with the NFT market since July. The launch came amid chatter of a “crypto winter” as cryptocurrencies saw a broad-based slowdown from their 2021 highs. The market saw an initial spike in volume but has since plateaued and may not be the ticket to a stable digital existence the company was hoping for.
However, Furlong said on an investor call that compared to 2021, when “many expected we were heading toward bankruptcy,” the company is in a better position.
“GameStop is a healthier business today than it was at the start of 2021,” he said.