SAN RAFAEL, CALIFORNIA – DECEMBER 8: Customers enter a GameStop store on December 8, 2021 in San Rafael, California. Video game retailer GameStop will report third-quarter earnings today after the closing bell. (Photo by Justin Sullivan/Getty Images)
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gamestop It said on Wednesday that quarterly sales were down and losses were up as it burned through cash and increased inventory.
The company also revealed a new association with crypto exchange FTX.
Shares of the company were up about 10% in after-hours trading.
In the fiscal second quarter ended July 30, the video game retailer’s total sales fell to $1.14 billion from $1.18 billion in the same period a year earlier. Its loss widened to $108.7 million, or 36 cents a share, compared with a loss of $61.6 million, or 21 cents, a year earlier.
GameStop’s results can’t be compared to estimates because so few analysts cover the company.
Inventory soared to $734.8 million at the end of the quarter. That is more than the $596.4 million at the end of the second quarter of the previous year. The company said in a statement that it intentionally increased merchandise to keep up with customer demand and address supply chain challenges.
The retailer has spent significantly on new initiatives, including NFTs. It had $908.9 million in cash and cash equivalents at the end of the quarter, slightly more than half of what it had at the end of the prior year period.
The company did not provide an outlook. It has not provided guidance since the start of the pandemic.
The traditional traditional video game retailer is trying to adapt its business to a digital world. It has gained new leadership, including Chairman of the Board Ryan Cohen, the founder of Tough and former activist investor of Bed bath and beyondand its CEO Matt Furlong, a Amazon veteran
But GameStop has struggled to turn a profit, prompting it to cut costs and change leadership. Last month, the company fired its chief financial officer, Mike Recupero, and employees laid off in all departments. Chief Accountant Diana Jajeh stepped in as the company’s new CFO.
The company’s expenses decreased 14% compared to the first quarter of the year, reflecting these layoffs.
GameStop has been looking at new ways to earn money, including non-fungible tokens. It’s launched an NFT market in July, which open to the public for beta testing. It allows users to connect their own digital asset wallets, including the recently launched GameStop Wallet, so they can buy, sell, and exchange NFTs for virtual goods.
As overall sales fell, the retailer pointed to the growth of some newer business. Sales attributable to collectibles increased from $177.2 million in the prior year second quarter to $223.2 million in the most recent quarter.
NFTs are traded on FTX, the retailer’s new partner. “In addition to collaborating with FTX on new e-commerce and online marketing initiatives, GameStop will begin offering FTX gift cards at select retailers,” GameStop said in a statement.
FTX was founded by a billionaire former Wall Street trader Sam Bankman-Fried30. It has become a lender of last resort for crypto businesses that have struggled as assets have fallen sharply since the end of last year.
The deal with FTX seems to factor into GameStop’s status as a meme stock.
The company’s shares have experienced strong fluctuations in value. Over the past year, the shares have gone from $19.39 to $63.92. Shares of the company are down 36% year-to-date, bringing the company’s value to $7.31 billion.
Read GameStop’s Earnings Release here.
This is a developing story. Please check back for updates.