THE GameStop (NYSE:GME) said Wednesday that quarterly revenue fell and losses widened as cash and inventory spending rose.
The video game retailer also unveiled a new partnership with cryptocurrency exchange FTX.
The company’s shares rose more than 6% in premarket trading on Thursday.
In the fiscal second quarter ended July 30, the company’s total sales fell to $1.14 billion from $1.18 billion in the same period a year earlier. Its losses widened to $108.7 million, or $0.36 per share, compared with a loss of $61.6 million, or $0.21, a year earlier.
GameStop’s results may not be comparable to estimates because few analysts cover the company. He did not provide a financial perspective and has not provided one since the beginning of the pandemic.
The merchant tries to adapt his business to the digital world. It got new leadership, including Chairman Ryan Cohen, founder of Chewy and former activist investor in Bed Bath & Beyond, and CEO Matt Furlong, an Amazon veteran. He was also looking for new ways to make money, including irreplaceable tokens.
But the company has struggled to grow profits, forcing it to cut costs and shake up its leadership. Last month, he fired CFO Mike Recupero and laid off employees in all departments. Chief Accounting Officer Diana Jajeh has joined as the company’s new CFO.
Furlong urged patience in an investor call Wednesday, saying GameStop must undergo a significant transformation to keep up with customers.
“Our journey to become a more diverse and technology-focused business clearly carries risks and will take time,” he said. “Nevertheless, we believe GameStop is a much stronger business than it was 18 months ago.”
GameStop’s new initiatives come at a high price. It had $908.9 million in cash and cash equivalents at the end of the quarter — just over half of what it had at the end of the previous year.
Inventories increased to $734.8 million at the end of the quarter. This represents an increase of $596.4 million at the end of the second quarter of the previous year. The company said in a statement that it deliberately increased merchandise to keep up with customer demand and address supply chain challenges.
Furlong said during the conference call that the company had to spend money to modernize the business after years of low investment. Among its stores, it has hired more than 600 people with talent in areas such as blockchain, while reducing shipping times so that customers receive purchases in one to three days.
Now, according to him, the company is focused on new priorities: becoming profitable, launching its own products and investing in its stores. He said he is also cutting costs. Expenses were down 14% from the first quarter of the year, including some reductions due to layoffs.
“We will maintain a strong focus on cost containment and continue to foster an ownership mindset across the organization,” he said.
As overall sales fell, he pointed to new business growth. GameStop launched an NFT marketplace in July that is open to the public for beta testing. It allows users to connect their own digital asset wallets, including the newly launched GameStop Wallet, to buy, sell and trade NFTs for virtual goods.
Sales attributable to collectibles increased from $177.2 million in the second quarter of the previous year to $223.2 million in the latest.
NFTs are traded on FTX, a new trader partner. “In addition to working with FTX on new e-commerce and online marketing initiatives, GameStop will begin shipping FTX gift cards in select stores,” GameStop said in a statement.
FTX was founded by billionaire ex-Wall Street investor Sam Bankman-Fried, 30. It has become a lender of last resort for struggling cryptocurrency companies as assets have plummeted since the end of last year.
The FTX deal seems to interfere with GameStop’s status as a “meme store.”
The company’s shares have suffered sharp fluctuations in value. Last year, the stock jumped from $19.39 to $63.92. Shares of the company have fallen about 36% so far this year, raising the company’s value to $7.31 billion.
Although the company is increasingly turning to e-commerce, Furlong said stores remain an important way to connect with customers and fulfill orders online.
GameStop has launched a new compensation model for U.S. store managers, he said. Each store manager can receive $21,000 in inventory, which is purchased over three years. They may also receive an additional payout through company shares on a quarterly basis, depending on their performance.
There is also an hourly increase for some store employees, but he did not share a specific salary.
With information from CNBC