Gamestop surges after reporting first profit in two years
Gamestop soared as much as 53%, heading for its biggest gain in two years, after reporting a surprise profit in the fourth quarter and beating analysts’ estimates for revenue.
Net income was $48.2 million, the first profit in two years, and compared with a loss of $147.5 million a year earlier, the Grapevine, Texas-based video game retailer said in a statement Tuesday. Net sales totaled $2.23 billion in the three months ended Jan. 28, beating analysts’ projections of $2.18 billion.
“Gamestop is a much healthier business today than it was in the start of 2021,” Chief Executive Officer Matt Furlong said on a call with analysts. “We have a path to full-year profitability.” The company didn’t offer an outlook for 2023.
Shares surged to as high as $27 as trading opened in New York on Wednesday. Very few analysts currently cover the so-called meme stock, which has fluctuated wildly over the past two years.
Gamestop, known for its consumer electronics and gaming merchandise, has struggled with profitability as the games industry has moved away from physical discs to online downloads. The industry has been further hamstrung by supply chain constraints on consoles and a relatively light schedule of new game releases last year. U.S. video game sales dropped 5% in 2022, according to industry researcher NPD Group.
The video game industry could be poised for a rebound this year with pentup demand for games after many anticipated titles were delayed in 2022. This year’s lineup includes Activision Blizzard’s continuation of Call of Duty: Modern Warfare II and Diablo 4 and Electronic Arts will release its next highly anticipated Star Wars game in April.
One bright spot in the quarterly results was Gamestop’s business selling physical collectibles, an area the company has identified as a long-term priority.
Sales in that category rose 12% to $313.2 million. Sales in the hardware and accessories category rose 4.6% to $1.24 billion but software sales fell 15% to $670.4 million.