Gamestop(NYSE: GME), an American video game, consumer electronics, and gaming merchandise retailer announced its second-quarter, the fiscal year 2020, earnings result on 09th September 2020.
While the company saw 800% of e-commerce growth, the sales fell approximately 27% as compared to the prior year.
GameStop’s chief executive officer, George Sherman commented, “The second quarter saw strong progress toward our strategic initiatives”.
He added, “We believe the actions we are taking to optimize the core operations of our business by increasing efficiencies and creating a frictionless digital ecosystem to serve our customers, wherever and whenever they choose to shop, are enabling us to navigate the COVID-19 environment while positioning us well for the launch of the next generation of consoles.”
SECOND QUATER FISCAL YEAR 2020 RESULTS SUMMARY-
- Net sales-
- Net Sales down by 26% from $1,285.7 million in the second quarter of 2019 to $942 million reported for the recent quarter.
- Sales composed of Hardware and accessories(46.9%), Software(41%), and Collectibles( 12.1%).
- The decline in sales was substantially attributable to the store closures and less customer traffic and short availability of hardware and accessories.
- A 13% decrease in total store operating days due to temporary store closures.
- Comparable store sales decreased by 12.7% during the current quarter.
- Global E-commerce sales rose 800%
- Gross Profit-
- Gross profit contracted by 36.8%, mainly due to a drop in sales.
- Selling, general and administrative expenses (“SG&A”)-
- Declined from $481.9 million in 2019 to $348.2 million in the second quarter of 2020, 28% lower.
- Lower SG&A, driven by decreases in payroll and other variable overhead costs due to temporary store closures due to the pandemic and cost savings accomplished as a result of GameStop Reboot plan.
- Operating loss-
- Declined by 80%, or $361 million, to $85 million in the second fiscal quarter 2020 from $446.7 million reported in 2019.
- Net loss-
- Net loss of $111.3 million, 73% lower, as compared to $415.3 million reported last year.
- Includes approximately $2.7 million of incremental expenses associated with safety materials and equipment to assure the safety of the clients and associates.
- Adjusted EBITDA of -$62.4 million compared to -$19.9 million in the prior-year second quarter.
- The company recorded $735.1 million of cash and cash equivalents in the balance sheet.
- Cash flow generated from operations of $143.5 million by the company in the second quarter.
- GME reported that they transferred approximately 40% of closed store sales to neighboring locations and online.
- Improved customer service as the company recorded a 90% fulfillment rate within 24 hours of customers placing an order.
- GameStop verified that it had resumed services at all of its locations worldwide that were closed due to COVID-19 to, at minimum, restrained customer access or curbside delivery by the end of August 2020.
According to the quarterly report for Q2 2020, “Although our sales have decreased compared to the prior-year periods as described above, we believe the COVID-19 pandemic has increased demand for at-home entertainment and connectivity products as consumers are spending more time in their homes and seek in-home entertainment options.”
The company is planning to expand its payment options for easy payment alternatives for customers, nothing is officially announced but CEO George Sherman confirmed “expanded service and payment options” are on the way.
Microsoft(NASDAQ: MSFT) and Sony(NYSE: SNE) are planning to launch new edition gaming consoles in the fall, so that might increase customer traffic to GameStop stores. Microsoft announced a digital-only version named the Xbox Series S which could harm physical store sales.