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A month has gone by since the last earnings report for GameStop (GME). Shares have added about 13.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GameStop due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
GameStop Q3 Earnings Beat Despite Sales Decline of 20% Y/Y
GameStop posted third-quarter fiscal 2024 results, wherein the top line missed the Zacks Consensus Estimate and declined year over year. On the contrary, the bottom line beat the consensus mark and improved from the year-ago period.
GameStop’s Quarterly Performance: Key Insights
GME posted adjusted earnings per share of 6 cents, beating the Zacks Consensus Estimate of break-even earnings.
GameStop reported net sales of $860.3 million, which missed the consensus estimate of $900 million. Also, the metric decreased 20.2% from $1,078.3 million in the year-ago quarter. The decrease in consolidated net sales was caused by lower sales across all categories.
By sales mix, hardware and accessories sales fell 28% to $417.4 million from $579.4 million in the year-ago quarter. Software sales were $271.8 million, down 15.4% from $321.3 million in the year-ago quarter. Sales in the collectibles unit declined 3.7% to $171.1 million from $177.6 million in the year-ago quarter.
By geographic location, net sales declined 24.5% in Canada, 22% in Europe, 20.4% in the United States and 12.5% in Australia year over year.
Insight Into GME’s Margins & Expenses Performance
Gross profit decreased 8.7% to $257.2 million from $281.8 million in the year-ago quarter. The gross margin expanded 380 basis points (bps) to 29.9% compared with 26.1% in the third quarter of fiscal 2023. This margin expansion was driven by a strategic shift toward higher-margin product categories, including collectibles and preowned hardware and accessories, along with enhanced inventory management.
Adjusted selling, general and administrative (SG&A) expenses declined 4.4% to $281.8 million from $294.9 million in the year-ago quarter. As a percentage of net sales, adjusted SG&A expenses were 32.8%, up 550 bps from 27.3% in the year-ago period.
GameStop reported an adjusted EBITDA loss of $11.2 million, down from an adjusted EBITDA of $5.1 million in the same quarter last year.
The company’s adjusted operating loss was $24.6 million in the reported quarter compared with an adjusted operating loss of $13.1 million in the prior-year period.