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GameStop Corp. reported a surprise profit in the fourth quarter and beat analysts’ estimates for revenue, sending the shares soaring as much as 39% in extended trading.
Net income was $48.2 million, the first profit in two years, and compared with a loss of $147.5 million a year earlier, the Grapevine, Texas-based video game retailer said in a statement Tuesday. Earnings per share were 16 cents, compared with a loss of 49 cents a year earlier. Net sales fell 1.2% to $2.23 billion in the three months ended Jan. 28, but that was higher than analysts’ projections of $2.18 billion.
The shares surged to a high of $24.50 after hours in New York. Very few analysts currently cover the so-called meme stock, which has fluctuated wildly over the past two years.
“GameStop is a much healthier business today than it was in the start of 2021,” Chief Executive Officer Matt Furlong said on a call with analysts. “We have a path to full-year profitability.” The company didn’t offer an outlook for 2023.
GameStop, known for its consumer electronics and gaming merchandise, has struggled with profitability as the games industry has moved away from physical discs to online downloads. The industry has been further hamstrung by supply chain constraints on consoles and a relatively light schedule of new game releases last year. US video game sales dropped 5% in 2022, according to industry researcher NPD Group.
One bright spot in the quarterly results was GameStop’s business selling physical collectibles, an area the company has identified as a long-term priority. Sales in that category rose 12% to $313.2 million. Sales in the hardware and accessories category rose 4.6% to 1.24 billion but software sales fell 15% to $670.4 million.
Supply chain delays during the pandemic left GameStop with a backlog of inventory that had accrued during previously high demand during the early Covid era. The company reduced inventory to $682.9 million at year end, down from $915 million from a year earlier.
Activist investor Ryan Cohen joined GameStop’s board and became its chairman in 2021, embarking on a reorganization that included ousting the chief financial officer and company-wide layoffs. A push into digital assets — the company announced a partnership with now-bankrupt cryptocurrency exchange FTX US last fall, only to cancel it two months later — has so far produced mixed results.
Retail traders turned GameStop into a meme stock during the pandemic, wildly pumping up its share price based on social media chatter unrelated to the company’s fundamentals.
