Gamestop Q2 Loss Narrower Than Expected, Revenues Up Y/Y

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GameStop Corp. (GME) posted second-quarter fiscal 2023 results, delivering a narrower-than-expected loss per share and better-than-expected revenues. The top and bottom lines increased from their respective year-ago quarter’s reported figures.

Shares of this Zacks Rank #2 (Buy) company have decreased 12.5% in the past three months compared with the industry’s 4.5% decline.

Q2 in Details

GameStop posted an adjusted loss of 3 cents per share in second-quarter fiscal 2023, narrower than the Zacks Consensus Estimate of a loss of 15 cents. The company had incurred an adjusted loss per share of 35 cents in the prior year quarter.

GME reported net sales of $1,163.8 million, which surpassed the Zacks Consensus Estimate of $1,143 million. Also, the metric increased from $1,136 million reported in the year-ago fiscal quarter. Management highlighted that a significant software release and increased sales of new gaming hardware in international segments contributed to the top-line growth, partially offset by a decline in sales of collectibles.

By sales mix, hardware and accessories sales inched up to $597 million from $596.4 million reported in the year-ago quarter. Software sales came in at $397 million, up from $316.4 million in the prior year quarter. Sales in the collectibles unit amounted to $169.8 million compared with $223.2 million reported in the year-ago quarter.

GameStop Corp. Price, Consensus and EPS Surprise

Margins

Gross profit increased to $305.9 million from $282.2 million in the year-ago fiscal quarter. Selling, general and administrative (SG&A) expenses declined to $322.5 million from $387.5 million reported in the year-ago quarter. As a percentage of net sales, SG&A expenses came in at 27.7%, down from 34.1% reported in the year-ago period.

The company’s adjusted operating loss was $20.7 million in the reported quarter. It had reported an adjusted operating loss of $106.2 million in the prior-year fiscal period. Adjusted EBITDA was $1 million compared with an adjusted EBITDA loss of $78.1 million in the prior-year quarter.

Other Financial Aspects

GameStop ended the second quarter with cash and cash equivalents of $894.7 million, long-term debt of $23.6 million, and stockholders’ equity of $1,267.2 million. Inventory was $676.9 million at the end of the reported quarter compared with $734.8 million at the close of the same quarter last year. This reflects the company’s ongoing focus on maintaining a healthy inventory position.

During the second quarter, the company used cash flow from operations of $109.1 million compared with an outflow of $103.4 million during the same period last year. Free cash flow at the end of the reported quarter came in at a negative $119.2 million. Capital expenditures in the quarter amounted to $10.1 million.

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