GameStop achieves first quarterly sales increase in two years

GameStop, the video games retailer whose shares have been the subject of a day-trading frenzy, recorded its first quarterly increase in same-store sales in two years on Tuesday and installed a former Amazon executive in a senior role.

The twin developments gave heart to an army of supporters who say the company can seize an opportunity to shift to ecommerce — even as hedge funds and other investors argue that the tenfold increase in GameStop’s stock this year has been detached from reality.

GameStop’s comparable sales grew 6.5 per cent year on year in the three months to the end of January, compared with a 24.6 per cent drop in the third quarter, boosted by a surge in online revenues during the holiday period.

Ecommerce sales were up 175 per cent, accounting for 34 per cent of net sales in the fourth quarter versus 12 per cent a year earlier.

The retailer appointed Jenna Owens, former Amazon and Google executive, as its new operating chief, part of a broader shake-up of its leadership team as it looks to stem a years-long decline in sales.

GameStop has already tapped Ryan Cohen, its largest shareholder and the co-founder of Chewy.com, to lead an expansion of its ecommerce business.

Optimism about the turnround effort among followers of the Reddit message board WallStreetBets helped spark the big rally in GameStop’s shares early this year, culminating in a short squeeze that cost hedge funds billions of dollars and became the subject of congressional hearings.

Yet the latest quarterly results showed a company still shrinking. Net sales fell to $2.12bn from $2.19bn in the year-ago quarter, hit by coronavirus-related store closures in Europe and a 12 per cent reduction in GameStop’s store base. Analysts were looking for $2.21bn in net sales.

Net income was $80.5m, compared with $21m a year ago. GameStop earned $1.34 per share on an adjusted basis, a penny shy of analysts’ forecast.

Camilla Yanushevsky, an analyst at CFRA Research, called the results underwhelming, noting that full-year revenues still fell more than one-fifth despite three rounds of stimulus cheques sent to US consumers and a boom in gaming during the pandemic. The decline “underscores how out of touch [GameStop’s] business model is with the secular trends we’re witnessing in consumer behaviour,” she said.

GameStop’s sales have fallen in recent years as it has struggled to adapt as digital downloads and free-to-play online games have taken over the gaming world and shopping mall traffic has slowed as consumers have gone online.

But George Sherman, chief executive, said the company was “off to a strong start” this year, citing a 23 per cent rise in February same-store sales amid strong global demand for gaming hardware.

“Our emphasis in 2021 will be on improving our ecommerce and customer experience, increasing our speed of delivery, providing superior customer service and expanding our catalogue,” he said.

GameStop shares hit a record high of $483 during the Reddit trading frenzy in January and, before the results were released on Tuesday, were up 865 per cent since the start of 2021. In after-hours trading they dipped more than 10 per cent.

GameStop said in a securities filing that it was evaluating whether to sell additional shares this year, primarily to fund its transformation.

Analysts and investors had anticipated that GameStop might take advantage of the sharp rise in its shares by selling stock. It already announced plans in December to sell up to $100m in stock through an at-the-market offering.

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Some WallStreetBets users said they were not fazed by the stock’s sell-off in after-hours trading on Tuesday and called on other investors to hold on to their shares. Some attributed the drop to traders who were expecting more from GameStop’s earnings call, during which executives did not take questions from analysts. Other commenters were bullish on the company’s 2021 plans.

Earlier in the day, GameStop said Frank Hamlin, its chief customer officer, would resign at the end of March, the second departure of a senior executive this month. It previously announced that Jim Bell, chief financial officer, would step down.

GameStop said it continued to “actively pursue” senior talent with ecommerce, retail and technology experience to help transform the business.

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