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GameStop Q3 2022 Report Underwhelms, Revenue Comes in $170M Less than Expected

UTC by Tolu Ajiboye · 3 min read
GameStop Q3 2022 Report Underwhelms, Revenue Comes in $170M Less than Expected
Photo: Depositphotos

The GameStop Q3 2022 earning report showed poor figures that reflect reduced consumer spending on its products.

GameStop (NYSE: GME) recently reported a bigger-than-anticipated loss on its Q3 2022 financial outing. The video game and gaming merchandise giant missed analysts’ estimates for several reasons, including the inflation pinch. Following its earnings miss for the period ended September 30th, GameStop’s management demonstrated an openness to acquisitions for the right price.

GameStop Q3 2022 Outing

GameStop’s revenue for the third quarter came in at a relatively tame $1.19 billion. This figure compared unfavorably to the consensus estimate of $1.36 billion for the same period. In addition, the video game retailer also lost 31 cents per share for Q3 versus analysts’ estimates of 28 cents per share deficit. Furthermore, GameStop reported third-quarter sales of $1.186 billion, which fell below analysts’ expectations of $1.345 billion. The company also revealed that hardware and accessories sales plunged to $627 million, down from $670 million last year. Overall, sales declined 19% year-over-year (YoY) to $352.1 million in the third quarter of 2022.

Conversely, GameStop also said that its Q3 2022 sales in the collectibles division increased 8% to $207 million. Immediately following the release of its latest quarterly earnings, GameStop stock slipped 1.3% to $21.97 in after-hours trading. The former meme stock remained relatively unchanged in post-market trading and was down 40% year-to-date by Wednesday’s close.

GameStop Strived for Cost-Effectiveness amid Harrowing Q3

GameStop weathered a challenging period due to macroeconomic factors during the third quarter. As a result, it may be unsurprising to some that the company put in a weak performance for Q3. In addition to inflation-induced constraints, GameStop also experienced insufficiency in new hit game releases for the period. This shortage did little to incentivize customers to go out and spend on more games amid the rising costs of consumer products.

Assessing GameStop’s Q3 performance from an operational standpoint, Wedbush analyst Michael Pachter noted:

“They managed working capital well, so they didn’t burn much cash, but they still had a loss of about $95 million. That’s unsustainable unless they get profitable one of these days, and directionally, it doesn’t look like that’s going to happen.”

GameStop chief executive officer Matt Furlong also weighed in on how the company’s Q3 outing would impact its projected cost-effective plans. As Furlong put it:

“We anticipate capital expenditure will remain at similar or reduced levels now that the company has largely completed its period of heavy investment.”

So far, GameStop’s expense as a percentage of revenue is 32.7%, representing a roughly 2% reduction from the second quarter. In addition, the gaming-oriented company has also tried to shed expenses by cutting its workforce and closing down stores.

Furlong also stated that GameStop would not offer formal financial guidance. The CEO suggested that the gaming retailer does not rule out a strategic acquisition if the right asset becomes available.

Digital Wallet

Earlier this year, GameStop launched a digital wallet to facilitate transactions in its specialized gaming marketplace. The company seeks to build a platform that supports buying, selling, and trading non-fungible tokens (NFTs). However, GameStop’s digital wallet aspirations face uncertainty with the onset of a crypto winter and dwindling digital asset prices.

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