GameStop (GME) Q1 2022 earnings results beat revenue estimates on wider than expected loss

GameStop is out with their Q1 2022 earnings results, and the company reported $1.38 billion in revenues, beating expectations of $1.3 billion. GameStop also reported a loss of $2.08/share, missing consensus expectations of a loss of $1.45/share.

Here are some interesting data points from the GameStop Q1 2022 earnings report:

Net sales were $1.378 billion for the quarter, compared to $1.277 billion in the prior year’s first quarter.
Sales attributable to new and expanded brand relationships contributed to the Company's growth in the quarter.
Inventory was $917.6 million at the close of the quarter, compared to $570.9 million at the close of the prior year’s first quarter, reflecting a continued focus on improving in-stock levels in merchandise to meet increased customer demand and offset supply chain headwinds.
Ended the period with cash and cash equivalents of $1.035 billion as well as no debt other than a low-interest, unsecured term loan associated with the French government’s response to COVID-19.
Took steps to support the recent launch of a digital asset wallet to allow gamers and others to store, send, receive and use cryptocurrencies and non-fungible tokens (“NFTs”) across decentralized apps. The wallet extension will enable transactions on GameStop’s NFT marketplace upon its intended launch in the second quarter.
Continued hiring individuals with experience in areas such as blockchain gaming, ecommerce and technology, and operations, including a new Chief Operating Officer with a background in retail and stores.
Gross profit decreased $31.6 million, or 9.6% during the first quarter of 2022 compared to the same period last year. Gross profit as a percentage of net sales declined to 21.7%, or 420 basis points, compared to 25.9% in the prior year quarter. Our gross profit for fiscal 2022 reflects increased freight costs driven by supply chain disruptions, incremental inventory reserves, market pressures, and a shift in product mix towards higher dollar lower margin categories.

BUSINESS PRIORITIES

GameStop is on a strategic path to fully leverage our unique position and brand in gaming. GameStop is focused on transforming into a customer-obsessed
technology company to delight gamers and is actively focused on efforts to (1) establish ecommerce excellence (2) expand our selection to deliver a marketleading offering in gaming & entertainment, (3) leverage existing strengths and assets, and (4) invest in new growth opportunities.

We are taking steps that include:

Increasing the size of our addressable market by offering vast product selection and growing our product catalog across PC gaming, collectibles,
consumer electronics, toys, augmented reality, virtual reality, blockchain technology, and other categories that represent the natural extensions of
our business;

Expanding fulfillment operations to improve speed of delivery and service to our customers;

Building a superior customer experience, including by establishing a U.S.-based customer care operation supported by frictionless ecommerce and in-store experience; and

Strengthening technology capabilities, including by investing in new systems, modernized ecommerce assets and an expanded, experienced talent

base.

In May 2022, we announced the launch of our digital asset wallet to allow gamers and others to store, send, receive and use cryptocurrencies and nonfungible tokens (“NFTs”) across decentralized apps. The wallet represents our first step into blockchain technology products, and will also enable transactions on GameStop’s NFT marketplace when it launches in the second quarter of 2022.

We believe these future transformation efforts are an important aspect of our continued business to enable long-term value creation for our shareholders. Accordingly, we prioritize long-term revenue growth and market leadership over short-term margins. The Company will continue to invest in growth initiatives, while continuing to prioritize maintaining a strong balance sheet. Connected to our transformation efforts, we have incurred and may continue to incur severance, store closure costs and expenses for consultants and advisors. See "Consolidated Results of Operations—Selling, General and Administrative Expenses" for additional information.

The GameStop (GME) Q1 2022 earnings call kicks off at 5:00 p.m. EDT, and we will be streaming it over at the Shacknews Twitch channel.

While GameStop did beat Wall Street's revenue expectations, the company's breakneck pace of SG&A spending pushed their bottom line into yet another worse than expected loss. They do mention that most of this loss was attributable to hiring individuals with blockchain, ecommerce, technology, and operations experience to help bolster their growth. The company also stated that the NFT Marketplace is still on track to launch in Q2 2022. Another highlight during the quarter was the 25% growth in collectibles revenue.

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

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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