We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
GameStop's (GME) Q3 Loss Wider Than Expected, Sales Rise Y/Y
Read MoreHide Full Article
Shares of GameStop Corp. (GME - Free Report) fell about 3.2% in the after-hours trading session on Dec 8, following its lower-than-expected third-quarter fiscal 2021 results. While the top line continued to increase year over year, the bottom-line loss widened from the year-ago period.
Nevertheless, management is progressing well with its growth endeavors, while maintaining a sturdy balance sheet. This Zacks Rank #3 (Hold) company has been increasing product catalog across consumer electronics, PC gaming, collectibles, toys and other categories.
The company is enhancing fulfillment operations and technology as well as strengthening e-commerce capabilities and improving speed of delivery and service to customers. It is also exploring emerging opportunities in blockchain, non-fungible tokens, and Web 3.0 gaming.
Q3 in Details
GameStop posted an adjusted loss of $1.39 per share wider than the Zacks Consensus Estimate of a loss of 22 cents. In the year-ago quarter, the company reported an adjusted loss of 53 cents.
The video game retailer reported net sales of $1,296.6 million that fell short of the Zacks Consensus Estimate of $1,303 million. Nonetheless, the metric surged 29.1% from the year-ago period. This year-over-year increase was primarily attributable to ongoing demand of the new video game consoles from Sony and Microsoft, and continued sell-through of the Nintendo gaming product lines. The company also witnessed higher store traffic compared with the last year.
Management highlighted that new and expanded brand relationships with Samsung, LG, Razer, Vizio and others contributed to the company's growth. The company’s focus on front-loading investments in inventory is helping it meet sturdy demand and mitigate supply chain challenges.
By sales mix, hardware and accessories sales surged 62% to $669.9 million. Software sales fell 2.2% to $434.5 million, while collectibles sales rose 30.8% to $192.2 million. During the quarter, net sales in the United States, Canada, Europe, and Australia segments increased 31.8%, 22.2%, 30.4% and 14.3%, respectively.
Image Source: Zacks Investment Research
Margins
Gross profit increased 15.3% year over year to $318.6 million, while gross margin contracted 290 basis points to 24.6%. This reflects a shift in product mix toward higher dollar lower margin categories such as new console hardware as stores reopened for customers, and increased freight and credit card fees associated with the shift to e-commerce sales.
Adjusted SG&A expenses jumped 17.2% to $421.5 million during the quarter due to costs associated with transformation efforts undertaken to evolve into a technology company. As a percentage of net sales, adjusted SG&A expenses improved to 32.5% during the quarter under review from 35.8% in the year-ago period, owing to lower store occupancy costs, as a percentage of net sales, driven by cost containment endeavors in fiscal 2020 and 2021. These net reductions include 449 permanent store closures since Oct 31, 2020 as part of the de-densification of store base.
The company’s adjusted operating loss amounted to $102.9 million in the reported quarter. It had reported an adjusted operating loss of $83.4 million reported in the prior-year quarter. Adjusted EBIDTA loss was $79.8 million compared with adjusted EBIDTA loss of $61.8 million in the prior-year quarter.
Other Financial Aspects
GameStop ended the quarter with cash and cash equivalents of $1,413 million, restricted cash of $39.5 million and stockholders’ equity of $1,754.9 million. The company had no debt other than a $46.2 million low-interest, unsecured term loan associated with the French government’s response to the pandemic.
During the third quarter, cash flows from operating activities were an outflow of $293.7 million compared with an outflow of $184.6 million in the year-ago quarter. This was primarily due to an increase in merchandise inventory levels. Inventory was $1,140.9 million at the end of the quarter under discussion compared with $861 million at the close of the prior-year quarter. Capital expenditures in the third quarter amounted to $12.5 million.
Wrapping Up
GameStop has been progressing well with its efforts to fortify infrastructure and technology capabilities. It is on track with adding more talented individuals across the organization with expertise in e-commerce, UI, UX, blockchain, operations and supply chain. The company is focused on competitive pricing, vast product selection and fast shipping.
Shares of GameStop have fallen 8.8% in the past three months compared with the industry’s decline of 4.5%. So far this year, the stock has soared more than 800%, thanks to meme-stock mania.
Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, sports a Zacks Rank #1 (Strong Buy). BOOT has a trailing four-quarter earnings surprise of 35.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and earnings per share (EPS) suggests growth of 54.6% and 188%, respectively, from the year-ago period.
Tapestry, which provides luxury accessories and branded lifestyle products, carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 29%, on average.
The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 14.8% and 17.9%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.3% for three-five years.
Target, a general merchandise retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 19.7%, on average.
The Zacks Consensus Estimate for Target’s current financial year sales and EPS suggests growth of 13.9% and 40.1%, respectively, from the year-ago period. TGT has an expected EPS growth rate of 14.4% for three-five years.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
GameStop's (GME) Q3 Loss Wider Than Expected, Sales Rise Y/Y
Shares of GameStop Corp. (GME - Free Report) fell about 3.2% in the after-hours trading session on Dec 8, following its lower-than-expected third-quarter fiscal 2021 results. While the top line continued to increase year over year, the bottom-line loss widened from the year-ago period.
Nevertheless, management is progressing well with its growth endeavors, while maintaining a sturdy balance sheet. This Zacks Rank #3 (Hold) company has been increasing product catalog across consumer electronics, PC gaming, collectibles, toys and other categories.
The company is enhancing fulfillment operations and technology as well as strengthening e-commerce capabilities and improving speed of delivery and service to customers. It is also exploring emerging opportunities in blockchain, non-fungible tokens, and Web 3.0 gaming.
Q3 in Details
GameStop posted an adjusted loss of $1.39 per share wider than the Zacks Consensus Estimate of a loss of 22 cents. In the year-ago quarter, the company reported an adjusted loss of 53 cents.
The video game retailer reported net sales of $1,296.6 million that fell short of the Zacks Consensus Estimate of $1,303 million. Nonetheless, the metric surged 29.1% from the year-ago period. This year-over-year increase was primarily attributable to ongoing demand of the new video game consoles from Sony and Microsoft, and continued sell-through of the Nintendo gaming product lines. The company also witnessed higher store traffic compared with the last year.
Management highlighted that new and expanded brand relationships with Samsung, LG, Razer, Vizio and others contributed to the company's growth. The company’s focus on front-loading investments in inventory is helping it meet sturdy demand and mitigate supply chain challenges.
By sales mix, hardware and accessories sales surged 62% to $669.9 million. Software sales fell 2.2% to $434.5 million, while collectibles sales rose 30.8% to $192.2 million. During the quarter, net sales in the United States, Canada, Europe, and Australia segments increased 31.8%, 22.2%, 30.4% and 14.3%, respectively.
Margins
Gross profit increased 15.3% year over year to $318.6 million, while gross margin contracted 290 basis points to 24.6%. This reflects a shift in product mix toward higher dollar lower margin categories such as new console hardware as stores reopened for customers, and increased freight and credit card fees associated with the shift to e-commerce sales.
Adjusted SG&A expenses jumped 17.2% to $421.5 million during the quarter due to costs associated with transformation efforts undertaken to evolve into a technology company. As a percentage of net sales, adjusted SG&A expenses improved to 32.5% during the quarter under review from 35.8% in the year-ago period, owing to lower store occupancy costs, as a percentage of net sales, driven by cost containment endeavors in fiscal 2020 and 2021. These net reductions include 449 permanent store closures since Oct 31, 2020 as part of the de-densification of store base.
The company’s adjusted operating loss amounted to $102.9 million in the reported quarter. It had reported an adjusted operating loss of $83.4 million reported in the prior-year quarter. Adjusted EBIDTA loss was $79.8 million compared with adjusted EBIDTA loss of $61.8 million in the prior-year quarter.
Other Financial Aspects
GameStop ended the quarter with cash and cash equivalents of $1,413 million, restricted cash of $39.5 million and stockholders’ equity of $1,754.9 million. The company had no debt other than a $46.2 million low-interest, unsecured term loan associated with the French government’s response to the pandemic.
During the third quarter, cash flows from operating activities were an outflow of $293.7 million compared with an outflow of $184.6 million in the year-ago quarter. This was primarily due to an increase in merchandise inventory levels. Inventory was $1,140.9 million at the end of the quarter under discussion compared with $861 million at the close of the prior-year quarter. Capital expenditures in the third quarter amounted to $12.5 million.
Wrapping Up
GameStop has been progressing well with its efforts to fortify infrastructure and technology capabilities. It is on track with adding more talented individuals across the organization with expertise in e-commerce, UI, UX, blockchain, operations and supply chain. The company is focused on competitive pricing, vast product selection and fast shipping.
Shares of GameStop have fallen 8.8% in the past three months compared with the industry’s decline of 4.5%. So far this year, the stock has soared more than 800%, thanks to meme-stock mania.
3 Picks You Can’t Miss Out On
Some better-ranked stocks include, Boot Barn Holdings (BOOT - Free Report) , Tapestry (TPR - Free Report) and Target (TGT - Free Report) .
Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, sports a Zacks Rank #1 (Strong Buy). BOOT has a trailing four-quarter earnings surprise of 35.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and earnings per share (EPS) suggests growth of 54.6% and 188%, respectively, from the year-ago period.
Tapestry, which provides luxury accessories and branded lifestyle products, carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 29%, on average.
The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 14.8% and 17.9%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.3% for three-five years.
Target, a general merchandise retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 19.7%, on average.
The Zacks Consensus Estimate for Target’s current financial year sales and EPS suggests growth of 13.9% and 40.1%, respectively, from the year-ago period. TGT has an expected EPS growth rate of 14.4% for three-five years.