(BFM Bourse) – The video game distributor published a profit for the last quarter of its financial year ended at the end of January, surprising the market.
It’s the “meme stock” par excellence: GameStop. This distributor specializing in video games, including Micromania stores, became famous in 2021, when retail investors joined forces on forums, such as Reddit, to overthrow short sellers. The idea was to group together to cause the stock to soar and thus force investors who had bet on the downside to unwind their positions, what is called a “short squeeze”.
If this frenzy of 2021 has died down somewhat, the action jumped this Thursday on Wall Street, taking 39% around 4:20 p.m. to 23.74 dollars. And to think that the stock was still trading under 1 dollar in mid-2020…
This time the trigger for this bullish wave is to be credited to the company itself. GameStop published Tuesday evening after the market closed its results for the fourth quarter of its financial year ended at the end of last January.
First profits for two years
Revenue fell somewhat, to $2.23 billion from $2.25 billion in the fourth quarter of fiscal 2021-2022. Nevertheless, Bloomberg points out that this figure exceeds the expectations of analysts (2.18 billion dollars) which, however, are not many to cover the value.
Above all, the group is back to profitability. GameStop thus generated an operating profit of 46.2 million dollars against a loss of 167 million dollars a year earlier. The group also recorded a net profit of $48.2 million compared with a net loss of $147.5 million a year earlier. This is simply the company’s first profit in two years.
Over the whole of the 2022-2023 financial year, the company remains in a loss, in the amount of 313.1 million euros, but GameStop has however reduced it by 17% compared to the previous financial year.
The company did not give a target for the current financial year. But its chief executive, Matt Furlong, quoted by Bloomberg, indicated that the group was “on the way to being profitable over the whole year”. “GameStop is a much healthier business today than it was at the start of 2021,” he said.
Sluggish video game sales
The company has managed to contain its costs. In the fourth quarter, general expenses represented 20.4% of sales against nearly 24% a year earlier. A logical recipe for being able to generate profitability while the video game market has suffered from logistical problems, particularly in terms of electronic components, and a limited catalog of major releases. According to figures from the firm NPD, sales of video games in the United States fell by 5% last year to 56.6 billion dollars.
Nevertheless, GameStop has certain axes of development, in particular figurines of video game characters. According to CNBC, Matt Furlong intends to develop this activity which enjoys high margins. It also plans to generate savings by cutting costs in European markets, where the company has already started to trim down the wing as it exits some countries.
Its turn to digital and digital assets has, on the other hand, proved to be mixed, underlines Bloomberg. The group notably launched a partnership last fall with the fallen cryptocurrency platform FTX, only to have to cancel it two months later. It also launched a marketplace for non-fungible digital tokens (NFTs) that didn’t really meet with much success, CNBC notes.
Julien Marion – ©2023 BFM Bourse