GameStop Bounces Back With $21 Million Q4 Profit

No wonder GameStop tried to call itself an “essential business” and didn’t want to shutter stores during the coronavirus pandemic.

The world’s largest video game retail chain March 26 reported a fourth-quarter (ended Feb. 1) profit of $21 million, compared with a loss of $188 million during the previous-year period. Revenue dropped 28% to $2.2 billion from $3 billion as the industry grapples with a lack of new-generation video game consoles slated to launch later this year.

For the fiscal year, GameStop, which operates about 5,400 stores, narrowed its net loss about 30% to $471 million from $673 million last year. Notably, the chain’s collectables segment saw a 10% decline to $245 million from $270 million.

“We delivered profitability, on an adjusted basis, ahead of our updated expectations, marking progress on our strategy to evolve our operating model and position GameStop for long-term profitable growth,” CEO George Sherman said in a statement. “We accomplished this, despite industry challenges that led to an expected significant decline in sales.”

Sherman said the chain improved efficiency and effectiveness across the company, including a $130 million reduction in adjusted SG&A expense, reductions in inventory, accounts payable and debt.

“We accelerated our digital capabilities by elevating our web platform and further optimizing our retail footprint through market de-densification, while setting up a laboratory in our Tulsa, Okla., market to test experiential elements in 12 stores with promising initial results.”

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GameStop also spent $199 million repurchasing shares. Wall Street approved, sending the stock up 9% in after-market trading. Shares finished up nearly 6% to close at $4.41 per share.

Regardless, GameStop has shuttered most stores to foottraffic, with sales limited to curbside pick-up and ecommerce. GameStop has temporarily halted in-store game trades and sales.

Notwithstanding the Q4 results and upcoming console launches, GameStop finds itself one of many victims of the global COVID-19 pandemic, according to media analyst Michael Pachter with Wedbush Securities in Los Angeles.

“We expect the pandemic to have largely passed by the end of July, and have not adjusted our models materially for periods after the second quarter,” Pachter wrote in a March 27 note. “While we are quite optimistic that the company will return to profitability in the fall, the effects of the pandemic may linger beyond the time frame we have modeled, putting our estimates at risk.”

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