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GameStop (GME) Q4 2022 earnings

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GameStop on Tuesday posted a quarterly profit for the primary time in two years, ending out its fiscal yr on a high note in the vacation quarter after grappling with sales declines, inventory woes and money flow pressure.

Shares of the corporate soared greater than 45% during after-hours trading.

For the quarter ended Jan. 28, net sales dropped barely to $2.23 billion from $2.25 billion in last yr’s fourth quarter. The video game retailer also posted a profit of $48.2 million, or 16 cents a share, in comparison with a lack of $147.5 million, or 49 cents, a yr ago.

GameStop didn’t provide financial guidance and has not done so for the reason that early days of the pandemic. Its results cannot be compared with Wall Street estimates because too few analysts cover the corporate.

The retailer had been working to steer itself back to profitability, and got there partly by cutting costs. Selling, general and administrative expenses got here in at $453.4 million for the quarter, or 20.4% of sales, in comparison with $538.9 million, or 23.9% of sales, within the year-earlier period.

A GameStop store operates in a strip mall on March 16, 2023 in Chicago, Illinois.

Scott Olson | Getty Images

CEO Matt Furlong said on an investor call the corporate goes into 2023 with further plans to chop excess costs including in European markets, where it has already exited and begun to drag out of some countries. He said that GameStop can be considering bolstering its business with higher margin categories reminiscent of toys.

GameStop had previously been riding some short-term, meme-stock momentum, but that has since leveled out and the corporate has made progress in right-sizing its business by cleansing up its inventory levels and remodeling its cost structure.

The stock closed trading on Tuesday at around $18 per share, down dramatically from its 52-week high of nearly $50 a few yr ago.

GameStop’s turnaround plan was reinvigorated by a leadership shake-up in 2021 that put Furlong, an Amazon veteran, on the helm and added Ryan Cohen, Chewy founder and former Bed Bath & Beyond activist investor, as board chair. The corporate also laid off staff and replaced its chief financial officer.

The retailer has been working to revamp its real estate portfolio and increase its online business because the video game industry heads in that direction.

For the complete fiscal yr, GameStop saw $5.93 billion in sales, down barely from $6.01 billion in fiscal 2021, and saw increased revenues from its collectibles category, which the retailer is banking will promote long-term growth.

Like many retailers, GameStop experienced supply chain delays that left it with a backlog of inventory after it previously tried to fulfill high demand. The corporate continues to be hanging on to $682.9 million in inventory, which is down from $915 million a yr ago, in accordance with its fourth-quarter balance sheet.

As a part of its revival strategy, GameStop also has been attempting to improve its money balance. This quarter, its money and money equivalents were $1.39 billion.

While managing the burdens of its brick-and-mortar presence, the corporate has also been working to seek out its digital identity. To this point, those experiments have include just a few missteps.

In September, it launched an ill-fated partnership with the now-bankrupt crypto exchange FTX. The businesses had planned to collaborate on e-commerce marketing and GameStop was going to sell FTX gift cards in its stores. Two months later, GameStop tweeted that it might be “winding down” the partnership and refunding anyone who had purchased an FTX gift card in its stores.

As well as, the corporate has been experimenting with an NFT marketplace since July. That launch got here amid chatter of a “crypto winter” as cryptocurrencies experienced a widespread cooldown from their 2021 rallies. The marketplace saw an initial volume surge but has since leveled off and might not be the ticket to a stable digital presence the corporate had hoped it might be.

Still, Furlong said on a call with investors that in comparison with 2021, when many “predicted we were heading for bankruptcy,” the corporate is healthier positioned.

“GameStop is a much healthier business today than it was initially of 2021,” he said.

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