GameStop Needs To Put Up A Better Fight

On December 6th, GameStop Corporation GME missed revenue expectations but topped earnings estimates with its fiscal third quarter results as it continues to face intense competition from even the e-commerce titan, Amazon.com Inc AMZN, and other mass merchants to which it is losing market share. But once investors digested the results, GameStop shares shrugged off early declines.

Third Quarter Highlights

For the quarter ended on October 28th, GameStop reported revenue dropped 9% YoY of $1.078 billion, coming short of analysts’ estimate of $1.186 billion. GameStop reported a net loss of $3.1 million, or 1 cent a share, improving from last year’s comparable quarter when net loss amounted to $94.7 million, or 31 cents a share. On an adjusted-per-share basis, GameStop broke even, which is better than the 8 cent loss that FactSet estimated. But, this achievement is mainly the result of aggressive cost cuts, including European store closures and lowered selling, general and administrative expenses by 23.6% YoY to $296.5 million. Gross profit for the quarter was down 3.4% YoY to $282 million.

While net sales in Europe expanded 12.8% due to eased supply constraints, net sales in Australia, the U.S. and Canada dropped by 16.8%, 13.3% and 9.7%, respectively. GameStop exited the quarter with cash and cash equivalents of $1.210 billion, compared with $1.195 billion at the end of the prior quarter. GameStop did not schedule a conference call and it doesn’t provide any guidance.

Alterations Of Corporate Investment Plans

Along with its quarterly report, GameStop announced two corporate investment plan changes. First is that as of now, company cash can be used used to buy equities instead of only short-term debt, along with the CEO Ryan Cohen now being in charge of directing investment activities. Cohen became CEO in September while he joined the board. in 2021. Although Cohen’s e-commerce background gave hope that he could modernize the video game-retailer, GameStop never released a detailed turnaround plan.

Wherever GameStop seeks to grow, Amazon is already there. Undoubtably, the fundamentals are overwhelmingly in the favor of Amazon. Although Amazon is still Amazon, GameStop is putting up a fight, even in the face of challenging competitors. But, it will need to go beyond cost-savings on its quest for profitability to stay in the game. But, first, it needs to adjust to Cohen’s leadership after weathering quite an executive shakeup.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.

This article is from an external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.