GameStop reports a loss, but calls it a down payment on its future

GameSto

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It didn’t surprise Wall Street with a net loss of $147.5 million in the fourth quarter of 2021, but the retailer said it was all part of its transformational game plan.

CEO Matt Furlomg, in a brief conference call to announce quarterly results, again emphasized that GameStop’s management is playing the game for the long term, rather than aiming for short-term profits.

GameStop’s management team, led last year by activist investor and Chewy co-founder Ryan Cohen, who became chairman of the board in April 2021, treats GameStop like a startup, with growth in sales more important, for the moment, than profits.

GameStop exceeded revenue expectations, with sales of $2.25 billion, up more than 6% from the fourth quarter of 2020. Revenue was also higher than in the pre-pandemic fourth quarter of 2019. But while analysts had forecast earnings of more than 80 cents per share, the company reported a net loss of $1.94 per share, compared to revenue of $1.18 for the fourth quarter of 2020.

Furlong noted that supply chain issues and the omicron variant were hurting revenue over the holiday season, but said the company “made a conscious decision to lean in and absorb higher costs in order to meet to customer requests”.

“We have believed, and continue to believe, that investing in our customers and rebuilding brand loyalty now is in the company’s best interests over the long term,” he said.

GameStop shares fell more than 9% after hours trading immediately after the earnings announcement. It was down 7% at 7 p.m.

GameStop shares typically fall the day after earnings are released. A To analyse published on Motley Fool on Wednesday showed the stock fell the day after the earnings release in 11 of the past 13 quarters, with an average drop of 13.8%.

Furlong’s 10-minute presentation was his longest and most informative earnings discussion since becoming CEO in June 2021.

He outlined a number of reasons to be optimistic about the company, including:

  • Plans to launch GameStop’s NFT Marketplace by the end of the second quarter of this year, a move that positions GameStop to tap into the $40 billion NFT market.
  • New fulfillment centers in Pennsylvania and Nevada enable faster shipping
  • A 32% increase in the number of members of the company’s PowerUp rewards program, year over year, with approximately 5.8 million total members.
  • New brand partnerships with gaming companies
  • A new app with an improved user interface and more ability to support exclusive offers and promotions.

“It’s important to point out that GameStop had become such a cyclical, capital-poor business that we had to rebuild it from the inside out,” Furlong said.

The new team’s first year at the helm of the company “was poised to begin transforming GameStop into a customer-obsessed technology company” with broader offerings, more competitive pricing, faster shipping, a enhanced customer service and an easier shopping experience, Furlong said.

The strategy going forward, he said, will be to “embrace rather than flee the new frontiers of play”.

“We learned from the mistakes of the past decade when GameStop failed to adapt to the future of gaming,” he said.

Wall Street skeptics say the future of gaming is that there will be no need for stores like GameStop.

Ryan Cohen and his team are making a different bet, one that gamers can be some of the most fanatical consumers in the metaverse. They bet there will always be an opportunity for a smart retailer to make big bucks selling things to gamers, both physical goods like consoles and collectibles, as well as anything in the future. digital reserve.