GameStop, one of the largest video game retailers in the world, has reported wider losses in Q3 2018, with sales falling by 2% year-on-year to $4.4 billion (market analysts had expected an increase of 1%). The company also announced that it was partnering with cryptocurrency exchange FTX to provide customers with the option to trade their old games for cryptocurrency rather than cash or credit.
GameStop said on Wednesday that its inventory increased and cash burn increased as quarterly sales dropped and losses grew.
The shop for video games has announced a fresh alliance with the cryptocurrency exchange FTX.
In after-hours trading, the company’s stock increased by roughly 10%.
In the second fiscal quarter ended July 30, the company’s total sales dropped to $1.14 billion from $1.18 billion in the year-ago period. Compared to a loss of $61.6 million, or 21 cents, a year earlier, its losses increased to $108.7 million, or 36 cents a share.
Because there aren’t enough analysts who cover GameStop, the company’s performance cannot be compared to estimates. Since the onset of the epidemic, it hasn’t offered a financial projection either.
The physical store owner is attempting to transform their operation for the internet age. It now has new leadership, including CEO Matt Furlong, an Amazon veteran, and board chair Ryan Cohen, the inventor of Chewy and a former activist investor in Bed Bath & Beyond. It has also considered novel revenue streams, like as nonfungible tokens.
However, the business has had trouble increasing earnings, forcing it to cut expenses and reorganise its management. It dismissed Chief Financial Officer Mike Recupero last month and made department-wide layoffs. Diana Jajeh, the organization’s former CFO, took over as the new CFO.
On a Wednesday investor call, Furlong pleaded for patience, saying that GameStop must undergo a big transition to remain competitive.
It will take time and clearly involve risk for our company to become more diverse and tech-focused, he added. Despite this, we think GameStop’s business is substantially better now than it was 18 months ago.
The new efforts at GameStop carry a significant price tag. At the end of the quarter, it had $908.9 million in cash and cash equivalents, which is slightly more than half of what it had at the same time last year.
At the end of the quarter, inventory had grown to $734.8 million. At the end of the second quarter of the previous year, that was an increase from $596.4 million. In a press release, the firm claimed that it purposely increased the amount of inventory to meet consumer demand and address supply chain issues.
Furlong stated on the call that following years of underinvestment, the company had to spend money to update its operations. In addition to reducing delivery times so that customers receive their products in one to three days, it has employed more than 600 employees with expertise in fields like blockchain.
Now, he claimed, the business is concentrated on new objectives: turning a profit, introducing exclusive items, and making investments in its retail locations. He said that it is also reducing costs. With some reductions brought on by layoffs, expenses fell by 14% from the first quarter of the year.
He declared, “We’re going to continue to promote an ownership culture across the firm and have a strong focus on cost minimization.
He emphasised the expansion of newer enterprises while total revenues declined. In July, GameStop unveiled an NFT marketplace that is now accepting beta testers from the general public. In order to purchase, sell, and trade NFTs for virtual goods, users can connect their own digital asset wallets, such as the recently released GameStop Wallet, to the system.
In the second quarter of the previous year, sales attributed to collectibles were $177.2 million; in the most current quarter, they were $223.2 million.
The retailer’s new partner, FTX, facilitates NFT trading. Along with working together on new e-commerce and online marketing initiatives, GameStop will start stocking FTX gift cards in a few of its stores, the company announced in a press release.
FTX was created by millionaire former Wall Street trader Sam Bankman-Fried, 30. He has become a lender of last choice for crypto companies that have suffered as the assets have dropped drastically since late last year.
The deal with FTX seems to support GameStop’s reputation as a meme stock.
Shares of the corporation have seen significant price swings. Shares have fluctuated from $19.39 to $63.92 in the last year. The company’s stock has down around 36% so far this year, bringing the company’s worth to $7.31 billion.
Furlong said that shops still play a crucial role in connecting with clients and completing online orders as the business shifts increasingly toward e-commerce.
According to him, GameStop has introduced a new remuneration plan for U.S. store managers. Each store manager is eligible for a $21,000 stock award that vests over three years. Depending on their success, they may also get quarterly bonuses in the form of company shares.
Some retail employees’ hourly wages are also rising as a result, though he did not disclose the exact amount.