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GameStop (GME) Reports Wider-Than-Expected Q3 Loss

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GameStop Corp. (GME - Free Report) posted a wider-than-expected third-quarter fiscal 2022 loss. However, the bottom line compared favorably with the year-ago fiscal quarter’s reported loss. The beleaguered video game retailer’s fiscal third-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 launched its non-fungible token (NFT) marketplace to aid gamers, creators, collectors and others in the buying, selling and trading of NFTs.

Q3 in Details

GameStop posted an adjusted loss of 31 cents per share in third-quarter fiscal 2022, narrower than the Zacks Consensus Estimate of a loss of 29 cents. In the year-ago fiscal quarter, the company had reported an adjusted loss of 35 cents a share.

The company reported net sales of $1,186 million, which missed the Zacks Consensus Estimate of $1,382 million. The metric declined from $1,296.6 million reported in the year-ago fiscal 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 $627 million from $669.9 million reported in the year-ago fiscal quarter. Software sales came in at $352.1 million, down from $434.5 million posted in the prior-year fiscal quarter. Sales in the collectibles unit amounted to $207.3 million compared with $192.2 million reported in the year-ago fiscal quarter.

Margins

Gross profit declined to $291.6 million from $318.6 million posted in the year-ago fiscal quarter, while the gross margin remained flat year over year at 24.6%.

Adjusted SG&A expenses stood at $386.6 million, down from $421.5 million reported in the year-ago quarter.

The company’s adjusted operating loss was $95 million in the reported quarter. It had reported an adjusted operating loss of $102.9 million in the prior-year fiscal period. Adjusted EBIDTA loss was $66.6 million compared with the adjusted EBIDTA loss of $79.8 million in the prior-year fiscal quarter.

Other Financial Aspects

The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $803.8 million, net long-term debt of $28.8 million and stockholders’ equity of $1,245 million. Inventory was $1,131.3 million at the end of the reported quarter compared with $1,140.9 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 third quarter, the company provided cash flow from operations of $177.3 million, compared with an outflow of $293.7 million during the same period last year. Free cash flow at the end of the reported quarter came in at $164.3 million. Capital expenditures in the quarter amounted to $13 million.

GME’s stock has declined 5.4% in the past six months compared with the industry’s fall of 19%.

3 Top Retail Stocks

We highlighted three better-ranked stocks, namely Tecnoglass (TGLS - Free Report) , GMS (GMS - Free Report) and Wingstop (WING - Free Report) .

Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 40.5% and 76.4%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.

GMS, a distributor of wallboard and suspended ceiling systems, currently sports a Zacks Rank of 1. GMS has a trailing four-quarter earnings surprise of 10.8%, on average.

The Zacks Consensus Estimate for GMS’ current financial-year sales and EPS suggests growth of 10.8% and 10.2%, respectively, from the year-ago reported figures. GMS has an expected EPS growth rate of 10.7% for three-five years.

Wingstop, which franchises and operates restaurants, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 5.8%, on average.

The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests growth of 25.3% and 22.2%, respectively, from the year-ago reported numbers. WING has an expected EPS growth rate of 11% for three-five years.


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GameStop Corp. (GME) - free report >>

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Wingstop Inc. (WING) - free report >>

GMS Inc. (GMS) - free report >>

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