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GameStop on Tuesday posted a quarterly profit for the first time in two years, finishing out the year on a high note after grappling with sales declines, inventory woes and cash flow pressure.
Shares of the company jumped about 45% during after-hours trading.
For the quarter ended Jan. 28, net sales dropped slightly to $2.23 billion from $2.25 billion in last year’s fourth quarter. The video game retailer also posted a profit of $48.2 million, or 16 cents a share, compared to a loss of $147.5 million, or 49 cents, a year ago.
GameStop did not provide financial guidance and has not given guidance since the early days of the pandemic. Its results can’t be compared with Wall Street estimates because too few analysts cover the company.
The retailer had been working to steer itself back to profitability, and got there in part by cutting costs. Selling, general and administrative expenses came in at $453.4 million for the quarter, or 20.4% of sales, compared to $538.9 million, or 23.9% of sales, in the year-ago period.
CEO Matt Furlong said on an investor call that the company is going into 2023 with further plans to cut excess costs including in European markets, where it has already exited and begun to pull out of some countries. He said that GameStop is also considering entering higher margin categories like toys.
GameStop had previously been riding some short-term, meme-stock momentum, but that has since leveled out and the company has made progress in right-sizing its business by cleaning up its inventory levels and reworking its cost structure.
The stock closed trading on Tuesday at around $18 per share, down dramatically from its 52-week high of nearly $50 about a year ago.
GameStop’s turnaround plan was reinvigorated by a leadership shake-up in 2021 that put Furlong, an Amazon veteran, at the helm and added Ryan Cohen, Chewy founder and former Bed Bath & Beyond activist investor, as board chair. The company also laid off staff and replaced its chief financial officer.
The company has been working to revamp its real estate portfolio and get more online as the video game industry heads in that direction.
For the full fiscal year, GameStop saw $5.93 billion in sales, down slightly from $6.01 billion in fiscal 2021, and saw increased revenues from its collectibles category, which the retailer is banking will bring long-term growth for the company.
Like many retailers, GameStop experienced supply chain delays that left it with a backlog of inventory after it previously tried to meet high demand. The company is still hanging on to $682.9 million in inventory, which is down from $915 million a year ago, according to its fourth-quarter balance sheet.
As part of its revival strategy, GameStop has also been trying to improve its cash balance. This quarter, its cash and cash equivalents were $1.39 billion.
While managing the burdens of brick-and-mortar, the company has also been working to find its digital identity. So far, those experiments have come with a few missteps.
In September, it launched an ill-fated partnership with the now-bankrupt crypto exchange FTX. The companies had planned to collaborate on ecommerce marketing and GameStop was going to sell FTX gift cards in its stores. Two months later, GameStop tweeted that it would be “winding down” that partnership and refunding anyone who had purchased an FTX gift card in its stores.
The company has also been experimenting with an NFT marketplace since July. That launch came amid chatter of a “crypto winter” as cryptocurrencies experienced a widespread cool-down from their 2021 rallies. The marketplace saw an initial volume surge but has since leveled off and may not be the ticket to a stable digital presence that the company had hoped.
Still, Furlong said on a call with investors that compared to 2021, when many “predicted we were heading for bankruptcy,” the company is better positioned.
“GameStop is a much healthier business today than it was at the start of 2021,” he said.
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