Gamestop Shares Soar on First Reported Profit in Two Years
Gamestop reported its first quarterly profit in two years for Q4 2022, which ended Jan. 28, 2023. The retailer reached net income of $48.2 million compared to a net loss of $147.5 million in Q4 2021 despite sales falling slightly to $2.23 billion from $2.25 billion in the previous year.
The retailer also reduced its inventory to $682.9 million, down significantly from the $915 million in hand at the close of Q4 2022. This, as well as cost-cutting initiatives that included headcount reductions over the course of 2022, contributed to the retailer’s profitability.
“Rather than stand still, we pivoted last year to cut costs, optimize inventory and focus on enhancing the customer experience,” said Matt Furlong, CEO of Gamestop on a call with investors. “We found efficient ways to improve shipping times, integrate online and in-store shopping experiences and establish a culture of increased incentivization amongst store leaders and tenured associates. This pivot obviously included headcount reductions as we streamlined operations and cultivated a fast-paced, intense operating environment geared toward cost containment, efficiency and profitability.”
Shares were up nearly 40% on the news as of March 22, 2023.However, it remains to be seen if this is the start of a long-term recovery or just a one-off success for the retailer on the back of one-time cost reductions. Sales remain flat, the company shuttered a Kentucky-based distribution center in January 2023 and its crypto investments have had a rocky history, including the November 2022 bankruptcy of its partner, crypto exchange FTX, which led Furlong to announce that “although we continue to believe there is long-term potential for digital assets in the gaming world, we have not and will not risk meaningful stockholder capital in the space.”