Video streaming sites and gaming platforms have been experiencing unusually high traffic ever since the virus-related movement restrictions came into effect last year, but conventional players like Gamestop Corporation (NYSE: GME) were left out of the boom.
In a surprise turn of events, the struggling game retailer hit the spotlight after its stock went on a roller-coaster ride in the early days of the year and made unusually strong gains. Interestingly, a large part of those gains was sustained though the stock withdrew later and entered a volatile phase.
GME, which was deemed a hot pick at one point, is probably one of the riskiest investments currently. It makes sense to adopt a wait-and-watch policy as far as investing is concerned because a major pullback is very much in the cards. Those currently holding the stock might feel an urge to sell, especially after this week’s post-earnings selloff.
The company’s financial performance during the pandemic has been unimpressive as the bottom-line mostly languished in the negative territory, which marked a deterioration compared to its performance in the pre-crisis period.
If the growth plan is any indication, the management looks determined to bring back Gamestop’s lost glory. Currently, the focus is on investing in long-term growth initiatives like product-catalog revamp and expansion of the fulfillment network. The top priorities also include ensuring an improved customer experience and delivering value for stockholders. The ongoing efforts to strengthen the balance sheet – the company raised around $1.1 billion recently through a stock offering – should help it fulfill the near-term goals.
The question is whether the aggressive drive to expand infrastructure and scale the business alone would help the company stay relevant in today’s digital-oriented gaming industry. Meanwhile, it needs to be seen to what the company’s e-commerce initiatives would help its sales performance. Store closures and continuing operating losses are the main challenges.
Our new 700,000 square foot facility in York, Pennsylvania also began shipping orders during the quarter. We grew our catalog by adding new products and leading brands across consumer electronics, collectibles, toys, and more. We signed a lease on a new customer care facility in South Florida and started adding talent to that team as we continue to build out customer care operations in the US. Lastly, we further strengthened our balance sheet and capital position by raising more than $1.1 billion in net proceeds from the June ATM program.
Matt Furlong, chief executive officer of GameStop
In the second quarter of 2021, the adjusted loss narrowed to $0.76 per share from $1.42 per share in the prior-year period but missed analysts’ estimates. Revenues moved up 26% annually to $1.18 billion and came in above the forecast. The company ended the quarter with a cash balance of $1.78 billion.
GME fell about 9% during Wednesday’s after-hours session soon after the earnings release, as it did after most of the earlier quarterly reports, but pared a part of the loss later. It has gained 17% in the past 30 days. Trading close to the $200-mark, the stock closed the last session slightly higher.