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GameStop (GME) Stock Up on Narrower-Than-Expected Q2 Loss

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Shares of GameStop Corp. (GME - Free Report) increased 11.7% during after-hours trading on Sep 7, 2022, after it posted a narrower-than-expected second-quarter fiscal 2022 loss. The company also announced its partnership with FTX US, one of the largest cryptocurrency exchanges.

That being said, the bottom line deteriorated from the year-ago quarter’s reported loss. The beleaguered video-game retailer’s fiscal second-quarter top line declined year over year and missed the Zacks Consensus Estimate.

GameStop has been undertaking initiatives to diversify the business and become a technology-driven organization. The Grapevine, TX-based company launchedits non-fungible token (NFT) marketplace to aid gamers, creators, collectors and others in buying, selling and trading NFTs. Management modernized and solidified its systems via the implementation of SAP.

GameStop Corp. Price, Consensus and EPS Surprise

 

GameStop Corp. Price, Consensus and EPS Surprise

GameStop Corp. price-consensus-eps-surprise-chart | GameStop Corp. Quote

 

Q2 in Details

GameStop posted an adjusted loss of 35 cents per share in second-quarter fiscal 2022, narrower than the Zacks Consensus Estimate of a loss of 38 cents. In the year-ago quarter, the company had reported an adjusted loss of 19 cents a share.

The company reported net sales of $1,136 million, which missed the Zacks Consensus Estimate of $1,254.7 million. The metric declined from $1,183.4 million reported in the year-ago quarter. Management highlighted that sales attributable to new and expanded brand relationships remained solid in the quarter.

By sales mix, hardware and accessories sales declined to $596.4 million from $609.6 million reported in the year-ago quarter. Software sales came in at $316.4 million, down from $396.6 million posted in the prior-year quarter. Sales in the collectibles unit amounted to $223.2 million compared with $177.2 million reported in the year-ago quarter.

Margins

Gross profit declined to $282.2 million from $320.9 million posted in the year-ago quarter, while gross margin contracted to 24.8% from 27.1%.

Adjusted SG&A expenses stood at $388.4 million, up from $372.3 million reported in the year-ago quarter.

The company’s adjusted operating loss was $106.2 million in the reported quarter. It had reported an adjusted operating loss of $51.4 million in the prior-year period. Adjusted EBIDTA loss was $78.1 million compared with adjusted EBIDTA loss of $29.5 million in the prior-year quarter.

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New Development

The company unveiled its partnership with FTX US (FTX), which is aimed at introducing more GameStop customers to FTX’s community and marketplaces. GameStop is partnering with FTX on new e-commerce and online marketing efforts. It will also start carrying FTX gift cards across select stores.

Other Financial Aspects

The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $908.9 million, net long-term debt of $32.1 million and stockholders’ equity of $1,343.5 million. Inventory was $734.8 million at the end of the reported quarter compared with $596.4 million at the close of the same quarter last year. The company maintains enough in-stock levels to meet customer demand and mitigate supply chain challenges.

During the second quarter, cash flow from operations was an outflow of $103.4 million, compared with an outflow of $11.5 million during the same period last year. Capital expenditures in the quarter amounted to $20.5 million.

GME’s stock has declined 8.6% in the past six months compared with the industry’s fall of 25%.

3 Key Retail Picks

Here we have highlighted three better-ranked stocks, namely Dillard's (DDS - Free Report) , Ulta Beauty (ULTA - Free Report) and Kroger (KR - Free Report) .

Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of nearly 215%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard's current financial year sales suggests growth of 4.8% from the year-ago period. DDS has an expected EPS growth rate of 14.6% for three to five years.

Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average.

The Zacks Consensus Estimate for Ulta Beauty’s current financial year sales suggests growth of 13.7% from the year-ago reported number. ULTA has an expected EPS growth rate of 11.9% for three to five years.

Kroger, which provides an array of goods ranging from household essentials, groceries and electronics to toys and apparel for men, women and kids, currently carries a Zacks Rank #2 (Buy). KR has a trailing four-quarter earnings surprise of 20.3%, on average.

The Zacks Consensus Estimate for Kroger’s current financial year sales suggests growth of 7.6% from the year-ago period’s reported figures. KR has an expected EPS growth rate of 11.3% for three-five years.


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Dillard's, Inc. (DDS) - free report >>

The Kroger Co. (KR) - free report >>

Ulta Beauty Inc. (ULTA) - free report >>

GameStop Corp. (GME) - free report >>

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