GameStop shares fall as video game retailer's losses widen
The video game retailer has front-loaded its inventory investments to meet customer demand, mitigate supply chain issues ahead of the holiday season
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GameStop shares are down more than 4% in premarket trading after the company's losses widened to $105.4 million, or $1.39 per share, in the third quarter, up from a loss of $18.8 million, or 29 cents per share, a year earlier. Meanwhile, net sales surged to $1.297 billion, compared to $1.005 billion a year ago.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP. | 27.27 | -1.78 | -6.13% |
The results come as Chewy.com founder and GameStop board chairman Ryan Cohen has enlisted a new leadership team to help transform the company from a struggling brick-and-mortar chain into an e-commerce juggernaut. The team is helmed by former Amazon executives Matt Furlong and Mike Recupero, who serve as CEO and CFO, respectively.
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During the quarter, the Grapevine, Texas-based video game retailer continued growing its product offerings, including an expansion of PC gaming merchandise across approximately 60% of its U.S. locations. The company has established partnerships with brands including Samsung, LG, Razer, Vizio and Logitech and is exploring opportunities in blockchain, NFTs and Web 3.0 gaming.
GameStop also began ramping up order shipments from its Reno, Nevada and York, Pennsylvania fulfillment centers and started utilizing its previously announced customer service center in South Florida.
In addition, the company added new offices in Seattle and Boston as it looks to attract fresh tech talent. Over the course of 2021, the company has made more than 200 senior hires from some top tech companies.
Auburn Hills, Michigan, USA - February 17, 2012: The GameStop location off Adams Road in Auburn Hills, Michigan. (iStock / iStock)
GameStop's inventory was $1.141 billion at the close of the third quarter, compared to $861 million a year ago, as the company front-loaded its investments to meet increased customer demand and mitigate supply chain issues ahead of the holiday season.
The company ended the quarter with $1.413 billion in cash and cash equivalents and a $46.2 million-low interest, unsecured term loan associated with the French government's response to COVID-19. It also secured new $500 million asset-based lending credit facility in November to help with liquidity and reduce borrowing costs.
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Similar to last quarter, executives declined to provide full-year guidance and did not take analyst questions.
"We believe our emphasis on the long term is positioning us to build what will ultimately become a much larger business relative to where we are in 2021," Furlong told analysts on the company's earnings call. "We believe revenue growth will translate to scale and market leadership and from their scale and market leadership will translate to greater free cash flows over time."
Despite its widened losses, GameStop has continued to be a favorite "meme" stock among retail investors, surging over 800% this year.
The company noted in a 10Q filing on Wednesday that the Securities and Exchange Commission issued a subpoena in August for documents concerning an investigation into the trading activity of its shares.
"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," GameStop wrote. "This inquiry is not expected to adversely impact us."