SAN RAFAEL, CALIFORNIA – DECEMBER 08: Customers enter a GameStop store on December 08, 2021 in San Rafael, California. Video game retailer GameStop will release its third quarter results today after the closing bell. (Photo by Justin Sullivan/Getty Images)
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GameStop said Wednesday that quarterly sales declined and losses widened as they burned cash and inventories ballooned.
The company also unveiled a new partnership with crypto exchange FTX.
Shares of the company rose about 10% after hours trading.
In the second fiscal quarter ended July 30, the video game retailer’s total sales fell to $1.14 billion from $1.18 billion a year ago. Its losses widened to $108.7 million, or 36 cents per share, from a loss of $61.6 million, or 21 cents, a year earlier.
GameStop’s results cannot be compared to estimates because too few analysts cover the company.
Inventories soared to $734.8 million at the end of the quarter. That’s up from $596.4 million at the end of the second quarter a year earlier. The company said in a statement that it intentionally inflated its merchandise to meet customer demand and deal with supply chain challenges.
The retailer has spent heavily on new initiatives, including NFTs. It had $908.9 million in cash and cash equivalents at the end of the quarter, just over half of what it had at the end of the period a year ago.
The company did not provide an outlook. He has not provided advice since the start of the pandemic.
The former brick-and-mortar video game retailer is trying to adapt its business to a digital world. It got new executives, including board chairman Ryan Cohen, the Chewy founder and former activist investor for Bed Bath & Beyond, and its CEO Matt Furlong, an Amazon veteran.
But GameStop struggled to turn a profit, leading it to cut costs and upset its leadership. Last month, the company fired its chief financial officer, Mike Recupero, and laid off employees in all departments. Chief Accountant Diana Jajeh stepped in as the company’s new CFO.
The company’s expenses fell 14% from the first quarter of the year, reflecting these layoffs.
GameStop looked for new ways to earn money, including non-fungible tokens. It launched an NFT marketplace in July, which is open to the public for beta testing. It allows users to connect their own digital asset wallets, including the recently launched GameStop wallet, so they can buy, sell and trade NFTs for virtual goods.
As overall sales tumbled, the retailer pointed to the growth of some newer businesses. Sales attributable to collectibles fell from $177.2 million in the second quarter of the previous year to $223.2 million in the most recent.
NFTs trade on FTX, the retailer’s new partner. “In addition to collaborating with FTX on new e-commerce and online marketing initiatives, GameStop will begin offering FTX gift cards at select stores,” GameStop said in a statement.
FTX was founded by former Wall Street billionaire trader Sam Bankman-Fried, 30. It has become a lender of last resort for crypto businesses that have struggled as assets have fallen sharply since late last year.
The deal with FTX seems to play into GameStop’s status as a meme store.
The company’s shares have experienced strong fluctuations in value. Over the past year, the shares have gone from $19.39 to $63.92. The company’s shares are down about 36% so far this year, bringing the company’s value to $7.31 billion.
Read GameStop’s earnings release here.
This is a developing story. Check back for updates.