GameStop Rallies After Cost-Cutting Progress Renews Optimism

Source
A GameStop Corp. Store As Earnings Figures Released
Photographer: Daniel Acker/Bloomberg

GameStop Corp. jumped as much as 25% in late trading after earnings handily beat analysts’ estimates, a sign that efforts to slash costs and shrink the ailing retail chain are paying off.

Fourth-quarter earnings amounted to $1.27 a share, excluding some items, the video-game seller said on Thursday. Even the most optimistic Wall Street analysts weren’t expecting more than 95 cents a share.

The profit performance wasn’t accompanied by better sales, though. On a same-store basis, they declined 26% last quarter, a bit worse than analysts projected.

The question now is how GameStop will fare during the Covid-19 pandemic and aftermath. Like many retailers, it temporarily closed its stores to discourage public gathering. (The chain reportedly made an attempt to claim it was “essential retail,” like grocery stores, and shouldn’t have to close.)

The company is still able to serve customers online, and Chief Executive Officer George Sherman said Thursday that the pandemic has increased demand over the past few weeks. With millions of Americans stuck at home, the use of video games has been booming.

“The Covid-19 outbreak has led to changes in how consumers work, play and learn,” he said in a statement. “While still early, we are pleased with the progress we have made to date in our initiatives to stabilize, optimize and transform the business.”

The next step, he said, is to find ways to grow again.

The stock rose as high as $5.50 in extended trading. It had been down 27% to $4.41 through Thursday’s close.