Written by Zaheer Kachwala
(Reuters) – GameStop reported third-quarter earnings on Tuesday as the video game retailer ramped up cost-saving efforts, including closing stores and selling higher-margin merchandise.
CEO Ryan Cohen told investors in June that the company would operate with a “smaller network and greater value-added elements” as part of its attempt to boost sales and profitability.
This helped GameStop achieve net income of $17.4 million in the third quarter, compared to a net loss of $3.1 million last year.
Its shares rose more than 2% in extended trading.
The company faces a slower turnaround in its core business as it struggles to increase sales of video game consoles and collectibles, while facing stiff competition from online retail giants such as Amazon.com and eBay.
They are also burdened by an uncertain macroeconomic environment, with consumers cutting back on their discretionary spending due to stubborn inflation and a slow recovery in the gaming market.
Michael Butcher, an analyst at Wedbush Securities, said he sees no signs that the company’s “core business is salvageable.”
“There is no conversion, just stock sales to willingly foolish investors,” Butcher said.
Its shares have risen more than 50% this year after stock influencer Keith Gill, also known as “Roaring Kitty,” resurfaced earlier in 2024, sparking excitement among his followers.
The company benefited from the jump in its stock price by raising about $3 billion earlier this year through stock sales.
Gill was a key figure in the meme stock craze of 2021, as GameStop stock soared 1,600% at one point in January of that year, crushing hedge funds that had bet against the video game retailer.
GameStop’s third-quarter revenue fell 20% to $860 million, compared to $1.08 billion a year ago.
Cash and cash equivalents at the end of the third quarter were $4.58 billion, compared to $4.19 billion in the previous three-month period.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Pooja Desai)
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