A narrower than expected net loss in the recent quarter attests to improving GameStop Corp. (NYSE:GME)’s outlook. The third-quarter financial results came in line with muted expectations owing to a challenging macro environment.
The video game retailer is slowly bouncing back, after years of contraction owing to a combination of poor selling environment and strategic blunders. Store shutdown owing to COVID-19 disruptions early in the year did take a toll on the core retailing business.
E-commerce sales Growth
Amid the challenges, the company continued to advance its strategic objectives focused on creating a digital-first Omni-channel ecosystem for games and entertainment. Leveraging Omni-channel capabilities, GameStop was able to register a 257% increase in e-commerce sales.
A surge in e-commerce sales can be attributed to, among other things, investments that improved web properties and mobile app as well as enhanced fulfillment capabilities. Optimization of expenses stores and inventory also led to a $316 million reduction in SG&A expenses.
While revenues in the recent quarter did drop 25% year over year, solid growth on e-commerce looks set to shrug off further declines going forward. In the third quarter, sales were down 30% to $1 billion, slightly below $1.09 expected by analysts.
Improving Outlook
The company heads into yearend on a firm footing, helped by unprecedented demand for new video game consoles. The new consoles have triggered a 16.5% increase in comparable-store sales, a trend expected to continue in the fourth quarter. The company is already projecting year on year increase in sales and profitability, reflecting the introduction of new gaming consoles.
GameStop has also made impressive strides in reducing its financial exposure. It has already trimmed its store base by 11%. Inventory levels plunging 33% a push to trim the company’s debt further indicates a growing focus in propelling the company back to the financial footing.
The video game retailer is planning a stock sale in the fourth quarter. Proceeds from the offering are to fund new product efforts as well as expand the company’s e-commerce presence.