Gamestop Corporation (GME)

GameStop Corporation (GME) stock declined by 15.03% due to the fourth-quarter fiscal 2023 results, delivering lower-than-expected earnings per share and revenues. While the top line declined year over year, the bottom line compared favorably with the year-ago quarter’s reported figure. Higher inflationary pressures on consumers’ spending in the gaming industry have been resulting in lower demand, weighing on the company’s results.

• Q4 in Details: GameStop posted adjusted earnings per share of 22 cents in fourth-quarter fiscal 2023 compared with the Zacks Consensus Estimate of 25 cents per share. The company reported an adjusted earnings per share of 16 cents in the prior-year quarter. GME reported net sales of $1,793.6 million, which missed the consensus estimate of $2,000 million. Also, the metric decreased 19.4% from $2,226.4 million reported in the year-ago fiscal quarter. Lower sales across all categories contributed to soft sales. By sales mix, hardware and accessories sales fell 11.9% to $1.09 billion from $1.24 billion reported in the year-ago quarter. Software sales were $465.3 million, down 30.6% from $670.4 million in the year-ago quarter. Sales in the collectibles unit declined 25.4% to $233.7 million compared with $313.2 million reported in the year-ago quarter.
• Margins: Gross profit decreased 16.1% to $419.2 million from $499.8 million in the year-ago fiscal quarter. Gross margin expanded 100 basis points (bps) year over year to 23.4% in the quarter under review. Adjusted selling, general and administrative (SG&A) expenses declined 20.8% to $358.9 million from $452.9 million reported in the year-ago quarter. As a percentage of net sales, SG&A expenses were 20%, down 30 bps from 20.3% reported in the year-ago period. The company’s adjusted operating income was $60.3 million in the reported quarter, compared to $46.9 million in the prior-year fiscal period. The adjusted operating margin increased 130 bps year over year to 3.4% in the fiscal fourth quarter. Adjusted EBITDA was $88 million against an adjusted EBITDA of $82.5 million in the prior-year quarter. Adjusted EBITDA margin increased 120 bps year over year to 4.9%.
• Other Financial Aspects: GameStop ended the fiscal fourth quarter with cash and cash equivalents of $921.7 million, net long-term debt of $17.7 million, and stockholders’ equity of $1.34 billion. Net merchandise inventory was $632.5 million at the end of the reported quarter compared with $682.9 million at the close of the same quarter last year.

GameStop Corporation Stock (GME) dropped by 6.50% from $16.46 to $15.39 in the trading on Monday October 2, 2023. The reason why stock GME is down is due to new CEO's strategy. Ryan Cohen became the videogame retailer's new CEO last week. Investors are questioning whether new leadership is enough to execute a successful turnaround. Ryan Cohen has called for "extreme frugality" at the gaming store operator.