Third Quarter Results- Spending Money to Make Money
Although revenue rose 29% to just under $1.3 billion, coming close to its 2019 position when it generated $1.4 billion in sales, GameStop saw losses widen significantly in the period to $1.39 per share from $0.53, far worse than the $0.58 per share loss analysts were anticipating. Overall net loss grew to $105.4 million.
Expenses jumped to $421.5 million which is expected as the company is investing heavily in being able to confront an online and digital future of gaming. Moreover, inventory rose to $1.14 billion as the company is stocked for the holidays as opposed to $861 million at the end of last year's comparable quarter. However, it should be noted that Black Friday that tends to bring the peak demand isn't included in these results.
Infrastructure Investments
GameStop is Set to Become the "Amazon of Gaming"
GameStop entered the year with three distribution facilities and added new fulfillment centers in York, Pennsylvania, and Reno, Nevada, along with the customer care center in Florida. Building out this massive footprint with Amazon-sized centers is essential to realizing chairman Ryan Cohen's vision.
The Verdict
GameStop is a company undergoing a transformation from a brick-and-mortar chain into an e-commerce retailer. But this turnaround is taking place in an environment shaped by escalating costs that are causing the company to burn through twice as much cash compared to a year ago. Unfortunately, management is practically not any particular insight into what it is doing to engineer this business turnaround.
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