SAN RAFAEL, CALIFORNIA – DECEMBER 08: Customers enter a GameStop store on December 08, 2021 in San Rafael, California. Video game retailer GameStop will report third quarter earnings 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 it burned through cash and inventory swelled.
The company also disclosed a new partnership with crypto exchange FTX.
Shares of the company rose about 10% in after hours trading.
In the second fiscal quarter ended July 30, the video game retailer’s total sales dropped to $1.14 billion from $1.18 billion in the year-ago period. Its losses widened to $108.7 million, or 36 cents per share, compared with a loss of $61.6 million, or 21 cents, a year prior.
GameStop’s results cannot be compared with estimates because too few analysts cover the company.
Inventory ballooned to $734.8 million at the close of the quarter. That’s up from $596.4 million at the close of the prior year’s second quarter. The company said in a release that it intentionally bulked up on merchandise to keep up with customer demand and cope with supply chain challenges.
The retailer has spent significantly on new initiatives, including NFTs. It had $908.9 million in cash and cash equivalents at the end of the quarter — a little more than half of what it had at the end of the year-ago period.
The company did not provide an outlook. It hasn’t provided guidance since the start of the pandemic.
The legacy brick-and-mortar video game retailer is trying to adapt its business to a digital world. It’s gotten new leadership, including board chair Ryan Cohen, the founder of Chewy and former activist investor for Bed Bath & Beyond, and its CEO Matt Furlong, an Amazon veteran.
But GameStop has struggled to drive profits, leading it to trim costs and shake up leadership. Last month, the company fired its chief financial officer, Mike Recupero, and laid off employees across departments. Accounting chief Diana Jajeh stepped in as the company’s new CFO.
The company’s expenses decreased by 14% from the first quarter of the year, reflecting those layoffs.
GameStop has looked to new ways to make money, including nonfungible 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 fell, the retailer pointed to growth of some newer businesses. Sales attributable to collectibles rose from $177.2 million in the prior year’s second quarter to $223.2 million in the most recent one.
NFTs trade on FTX, the retailer’s new partner. “In addition to collaborating with FTX on new ecommerce and online marketing initiatives, GameStop will begin carrying FTX gift cards in select stores,” GameStop said in a release.
FTX was founded by billionaire former Wall Street trader Sam Bankman-Fried, 30. He has become a lender of last resort for crypto firms that have struggled as the assets have declined sharply since late last year.
The agreement with FTX appears to play into GameStop’s status as a meme stock.
The company’s shares have seen sharp fluctuations in value. Over the past year, shares have swung from $19.39 to $63.92. The company’s stock is 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.