After several wild weeks in the spotlight, GameStop Corporation (NYSE: GME) released financial results for the quarter that ended on January 30
th
. On Tuesday, GameStop showed it achieved its first quarterly sales increase in two years but fell short of Wall Street expectations. The gaming retailer also added a former Amazon.com Inc (NASDAQ: AMZN) and Alphabet Inc (NASDAQ: GOOG)-owned Google executive to its team. However, shares fell 33% due to lack of transformation detail.
Q4 figures
Net sales were $2.1 billion during the quarter, which is 3% down from the same period in the prior year due to coronavirus-related store closures in Europe and a 12 per cent reduction in GameStop’s store base. The figure is also slightly below the $2.2 billion Wall Street analysts had expected, according to Refinitiv. Net income from the quarter amounted to $80.5 million, or $1.19 per diluted share which was well below analysts’ projections. However, it was a significant improvement from the $21 million in net income earned during the corresponding quarter last year. GameStop earned $1.34 per share on an adjusted basis which is a penny shy of analysts’ forecast. For the full year 2020, GameStop posted a net loss that exceeds $215 million.
Global e-commerce sales increased 175% and presented a rare bright spot as they made 34% of the company’s total net revenue during the quarter as opposed to 12% during the same period last year. That bodes well for the company’s effort to transition to online sales as it closed a net 693 stores during 2020, with now having 4,816 stores across the globe.
Comparable sales grew 6.5 per cent YoY during the quarter, compared to 24.6% drop in the third quarter, boosted by a surge in online revenues during the holiday period.
New addition
The retailer appointed Amazon and Google’s former executive Jenna Owens as its new operating chief, which is part of a broader shake-up of its leadership in an effort to put an end to a years-long decline in sales. GameStop has already won over Ryan Cohen, the co-founder of Chewy.com who invested heavily in the company and became its largest shareholder, to lead an expansion of its ecommerce business. In early February, Matt Francis, a former engineering leader at Amazon Web Services, was appointed as the company’s first-ever chief technology officer with a responsibility to oversee e-commerce and technology-related functions. Weeks later, the company announced its Chief Financial Officer Jim Bell is steeping down and that it is looking for a new finance leader with the capabilities and qualifications to help accelerate the company’s undergoing transformation.
GameStop’s sales have fallen in recent years as it has struggled to adapt to a reality of digital downloads and free-to-play online games that have taken over the gaming world with shopping mall traffic slowing as consumers have gone online. But the CEO, George Sherman, believes the company entered 2021 strong, citing a 23% rise in February same-store sales amid strong global demand for gaming hardware.
Outlook
GameStop provided no financial guidance for 2021. But Tuesday’s call was used to provide details of a number of other strategic initiatives aimed at turning the business around in 2021 such as a plan to establish a US-based customer care operation, along with expanding its product offerings beyond video games and consoles. By adding computers, monitors, mobile gaming, gaming TVs and other PC gaming products to its offerings, GameStop hopes to expand its addressable market by over five times.
Emphasis in 2021 will be on improving its ecommerce footprint as well as customer experience through speeding up delivery, providing superior customer service and expanding the catalogue. The gaming retailer is obviously working hard to turn things around and transform itself into “a customer-obsessed technology company that delights gamers”. Many investors hope that Cohen can shake things up for the gaming retailer to be able to play in the e-commerce game.
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