Dive Brief:
- GameStop on Tuesday reported its first quarterly profit in two years. The retailer last recorded a profit in Q4 2020. For the current quarter, GameStop reported net income of $48.2 million during the holiday quarter compared to a net loss of $147.5 million year over year. Net sales fell slightly to $2.23 billion from $2.25 billion.
- For the year, the company’s net sales were nearly flat at $5.93 billion versus $6.01 billion in the previous year. GameStop reported a gross profit of $1.37 billion, SG&A expenses of $1.68 billion and a net loss of $313 million.
- GameStop’s stock rose on the news of the company’s profitable quarter. CEO Matt Furlong said on a call that the company “is a much healthier business today than it was at the start of 2021,” but added that GameStop will continue to “aggressively cut costs” and “pursue further cost containment.”
Dive Insight:
Part of GameStop’s turnaround strategy includes reducing its headcount. The company most recently initiated rounds of layoffs in December and January. GameStop also closed a Kentucky distribution center that month.
In an earnings call Tuesday, Furlong said the company started 2021 with “burdensome debt, dwindling cash, strained relationships with vendors and no meaningful stockholders in the boardroom.” Analysts predicted the company might be headed for bankruptcy.
The 2022 fiscal year began with an operating environment affected by inflation and macroeconomic headwinds. In response, Furlong said GameStop cut costs, improved shipping times and optimized its inventory.
According to a call transcript, Furlong also said that “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.”
In its most recent 10-K, which covers 2021, the company said it had about 4,500 stores in the US, Canada, Europe and Australia. GameStop employed about 12,000 full-time salaried and hourly associates and between 14,000 and 28,000 part-time associates globally depending on the time of year. The company has not disclosed how many people were let go in recent rounds of layoffs.
But Furlong, who became CEO midway through 2021, said GameStop ended the year with cash on hand, a streamlined inventory, no borrowings under its asset-based lending facility, negligible debt and a path to full-year profitability.
Despite an improved operational and financial position, the company declined to issue any guidance this week, with Furlong saying “we want stockholders to judge us on our results instead of our words.” Furlong was the only company executive on the call and declined to take questions.
