Taking the game off Gamestop

The retail chain’s fiscal third-quarter results reported late Wednesday showed double-digit sales growth for the company’s third consecutive period. Revenue jumped 29% year over year to about $1.3 billion. That was ahead of some Wall Street analysts’ consensus target of $1.2 billion, which is still poised to cover the meme-addled stock. But merchandise inventory also rose 91% from the previous quarter — the biggest sequential jump in more than a decade, as the company claimed it was working to meet increased demand and ease supply-chain issues. There was a “front-loading investment”. GameStop’s share price fell 10% Thursday.

The results gave another glimpse into the company’s new direction. Hardware and accessories revenue increased 62% year over year, while collectibles revenue grew 31%. In contrast, revenue from game software declined 2% year over year. GameStop’s restructuring of segment reporting last year makes it difficult to compare with the prior period, but note that new game software alone comprised more than 42% of the company’s total sales. Now, both new and used software combined make up about one-third of revenue.

The trend is understandable. In a world in which most videogames are sold as digital downloads, there is still little opportunity for a retailer to run more than 4,200 stores at last count. And, while GameStop’s new management team still isn’t ready to share many of the details of its plans — chief executive Matt Furlong spoke for just seven minutes on Wednesday’s call and again took no questions — the company’s statement There was no mention of sports in it. Instead it acquired Samsung Electronics Co., LG Electronics Inc. and Razer Inc. The contribution of brands such as established names in videogame PCs and peripherals. And Mr. Furlong said the company is “exploring emerging opportunities” in the latest market for blockchain, NFTs and “Web 3.0 gaming” – the latter being another term for the metaverse.

But such a move is not without risk. According to data from S&P Global Market Intelligence, GameStop’s unique blend of new and pre-eminent videogame hardware and software has historically driven the company’s gross margin to close to 30% — the high-teens for computer and electronics retailers. above average. And while the company’s coffers are still flush with more than $1 billion raised through stock sales for its enthusiastic investor base, it’s burning cash — more than $306 million in the latest quarter alone. Colin Sebastian of Robert W. Baird & Co. said Wednesday that “even some loyalists may start asking questions if the cash outflow picks up next year.”

This story has been published without modification in text from a wire agency feed