GameStop reported a substantially higher loss of $105.4 million for its fiscal third quarter as the company looks to reshape its business model.
American video game retailer GameStop (NYSE: GME) saw its shares drop by 4% during Wednesday’s extended trading session after a disappointing third quarter. This comes after the company reported a loss of $105.4 million, or $1.39 per share, for its fiscal third quarter. A year earlier, GameStop had reported a net loss of $18.8 million or 29 cents per share for the same period.
However, the gaming retailer’s total revenue grew to $1.30 billion from $1 billion a year before. This beat out Wall Street’s estimates of $1.19 billion for the same period. GameStop ascribes this sales growth to the expanded relationships with other brands such as Samsung, Razer, LG, and Vizio.
Amid this loss, GameStop revealed that it received a subpoena from the Securities and Exchange Commission (SEC) in August. The regulatory agency wanted the gaming retailer to provide documents that would aid an investigation into its share trading activity. GameStop expressed a willing desire to cooperate with whatever the SEC had going on. In a regulatory filing on Wednesday, the gaming company issued a statement that reads:
“We are in the process of producing the documents and have been and intend to continue cooperating fully with the SEC Staff regarding this matter.”
Before Loss in Third Quarter, GameStop Was One of the Meme Stocks Early This Year
GameStop’s stock was part of the meme frenzy that dominated the market headlines earlier in the year. This was largely due to conversation trails on social media platform Reddit, as well as the activities of day traders. Other companies that saw their stocks enter meme territory during this same period were AMC (NYSE: AMC) and Bed Bath & Beyond (NASDAQ: BBBY). It was this phenomenon that attracted the SEC, prompting the Commission to investigate trading activity.
GameStop has pointed out that the ongoing SEC investigation would not adversely impact its operations. The company built up its inventories for the latest quarter as it looked to preempt any supply chain hurdles. GameStop’s inventory was worth $1.14 billion at the close of the quarter, compared to $861 million for the same period last year.
GameStop Effects Shake-Ups to Remain Competitive
GameStop’s brick-and-mortar business model especially went through some trying times during the height of the Covid pandemic. During the lockdown, the company had to shutter several physical stores in many places. In light of that, GameStop is now looking to transform into an e-commerce retailer. The company is leveraging pandemic-triggered online shopping by attempting to sell its gaming products and accessories online. As part of its shake-up in achieving this, GameStop has enlisted Chewy co-founder Ryan Cohen to lead the charge as chairman. Cohen, in turn, recruited former executives at Amazon (NASDAQ: AMZN), Matthew Furlong, and Mike Recupero, to top management positions at GameStop. The former will serve as chief executive officer, while the latter will function as chief operations officer.
GameStop also announced that it established new offices in Seattle and Boston to attract tech talent. The leading gaming retailer also disclosed that it secured a $500 million asset-based lending credit facility. According to GameStop, this occurred in November and is going to facilitate liquidity and lower borrowing costs.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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