GameStop (GME) Q4 2021 earnings results beat revenue expectations, posts loss

GameStop just posted its Q4 2021 and full year earnings results. The company reported an unexpected loss of $1.94/share with revenues coming in at $2.25 billion. Here's a breakdown of all of the information GME 10-K.

Here are some interesting bits of news from the GameStop Q4 2021 earnings report:

Generated net sales of $2.254 billion for the quarter, compared to $2.122 billion in the fourth quarter of 2020 and $2.194 billion in the fourth quarter of 2019.
Established new and expanded brand relationships, including with PC gaming companies such as Alienware, Corsair and Lenovo, that contributed to sales growth in the quarter.
Grew PowerUp Rewards Pro members by 32% on a year-over-year basis, taking total membership to approximately 5.8 million
Entered into a partnership with Immutable X that is intended to support the development of GameStop’s NFT marketplace and provide the Company with up to $150 million in IMX tokens upon achievement of certain milestones.
Launched a redesigned app, which includes an enhanced user interface, improved scalability for a larger product catalog and more functionality to support exclusive offers and promotions.
Hired dozens of additional individuals with experience in areas such as blockchain gaming, ecommerce and technology, product refurbishment and operations.

GameStop also provided some data about their full year performance:

Generated net sales of $6.011 billion for the fiscal year, compared to $5.090 billion for fiscal year 2020.
Expanded the product catalog to include a broader set of consumer electronics, PC gaming equipment and refurbished hardware.
Made significant and long-term investments in the Company’s fulfillment network, systems and teams.
Established new offices in Seattle, Washington and Boston, Massachusetts, which are technology hubs with established talent markets.
Raised more than $1.67 billion in capital and eliminated all of the Company’s long-term debt, other than a $44.6 million low-interest, unsecured term loan associated with the French government’s response to COVID-19.
Ended the fiscal year with $1.271 billion in cash and cash equivalents and $915 million in inventory, compared to $635 million in cash and $602.5 million in inventory at the end of fiscal year 2020. Increased investments in inventory reflect the Company’s focus on meeting heightened demand and mitigating supply chain headwinds.

It certainly appears to be a mixed bag of results for GameStop's Q4 2021 earnings release. Revenue at the company topped $6 billion for the full fiscal year, up 18% from the prior year. Not everything is sunshine and roses for the embattled video game retailer, as the company surprised some investors by posting a net loss of $381 million for the full year.

The quarterly data paints a less bullish picture, with the company's margins decreasing from Q4 2020. GameStop's Q4 2021 net loss came in at $147.5 million, compared to a profit of $80.5 million in the year ago quarter. This material miss of EPS expectations is due to a few factors. Costs of sales increased to 83% of Net Sales in Q4 2021, and Selling, general, and administrative expenses (SG&A) were also up from 2020. GameStop is bringing in more revenue, but the costs associated with the sales growth are also growing.

One balance sheet data point to note is the increased amount of inventory. GameStop ended the fiscal year with $915 million in inventory, up from $602.5 million at the end of fiscal 2020. The company claims that "increased investments in inventory reflect the Company’s focus on meeting heightened demand and mitigating supply chain headwinds." With over $1.271 billion of cash on the balance sheet, and virtually no debt, it seems that some investors may be willing to give Ryan Cohen and the board some more time to execute a turnaround.

While there may be some reasons for optimism, the EPS miss is definitely cause for concern. GameStop was expected to report a profit of $0.76/share, but instead came in with a loss of $1.94/share. That is so far off of expectations, it may have some folks wondering why this wasn't preannounced. GameStop no longer provides forward-looking guidance, which is probably why this miss wasn't made public sooner than today.

Listen to the GameStop (GME) Q4 2021 earnings call here

The GameStop (GME) Q4 2021 earnings call kicks off at 5:00 p.m. EDT, and we will be streaming it over at the Shacknews Twitch channel.

Be sure to check out our GME topic page to keep up to date.

This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.

Full Disclosure:

At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:

Long GameStop via GME shares (partially-hedged with out-of-the-money put options)

Long GameStop via GME call options