Shares fall as the company says it will sell shares to fund transformation
After a trading frenzy fueled by Reddit earlier this year, investors are finally getting a glimpse of GameStop’s fundamentals.
Here’s what the company did after the bell on Tuesday.
- Fourth quarter results were released that were missing Wall Street estimates on the top and bottom lines.
- In its recent management reorganization, the company named former managing director of Amazon and Google, Jenna Owens, as its new chief operating officer.
- In a note of transformation that got some investors excited about the stock, the company said global e-commerce sales rose 175% in the most recent quarter, accounting for more than a third of its sales over the period.
- GameStop also confirmed in a filing that it is considering selling additional shares.
- The company declined to answer questions during a highly anticipated earnings conference call, which was reaching maximum capacity at a certain point in time.
The stock initially traded higher after the bell but fell about 12% most recently, with traders likely responding to the potential stock sale. An action that many investors and analysts deemed prudent given the stock’s surge fueled by Reddit. There is also likely some disappointment with the lack of detail from the conference call without answering questions.
“Since January 2021, we have been examining, especially in the course of the 2021 financial year, whether the ATM program (on the market) should be enlarged and shares of our ordinary shares of class A should be sold as part of the increased ATM program in order to accelerate our future transformation initiatives and the to finance general working capital needs, “the company said in a statement.
For the fiscal period ending January 2021, GameStop achieved $ 1.34 per share on revenue of $ 2.12 billion. Wall Street expected earnings per share of $ 1.35 on sales of $ 2.21 billion, according to the average of the six analysts at Refinitiv.
GameStop’s earnings in the fourth quarter of its fiscal year typically make up most of the company’s annual earnings, which is boosted by Christmas sales. The company’s sales in the same store rose 6.5% in the most recent quarter.
No instructions, but February strong
The company announced it will continue to suspend the guidelines, but is updating its fulfillment operations to increase the speed of its delivery and services. GameStop CEO George Sherman also announced that comparable store sales rose 23% in February thanks to strong global hardware sales.
“Looking ahead, we are excited about the opportunities that will arise as we begin to prioritize long-term digital and e-commerce initiatives while continuing to grow our core business in this emerging console cycle,” said Sherman in the earnings release .
The company declined to answer questions during a highly anticipated earnings conference call, which was reaching maximum capacity at a certain point in time.
Tuesday’s gains also mark GameStop’s first quarterly report since January’s trading frenzy.
That month, an epic short squeeze in the company’s stock shocked Wall Street, drawing attention to a rising class of retail investors on social media platforms like Reddit. GameStop’s share price rose to $ 483 per share and then lost 90% of its value. The controversy drew the attention of Wall Street and Washington.
Since GameStop’s rise and fall in January, the stock has continued to rise, with the stock rising nearly 80% this month. GameStop stock is up more than 860% in 2021.
GameStop has a market cap of nearly $ 14 billion, more than ten times the market value of $ 1.3 billion the stock was at the end of last year. A year ago, GameStop’s market cap was $ 245 million.
Cohen drives changes
GameStop stock has had a positive impact on new developments for the company over the past five months, including the appointment of Chewy co-founder Ryan Cohen to GameStop’s board of directors and GameStop’s technology and e-commerce transition.
GameStop also said after the bell that it will continue to seek executives with e-commerce, retail and technology expertise to support its turnaround. Sherman said on the conference call that GameStop “was designed to transform itself into a customer-obsessed tech company that gamers would love”.
Earlier this month, GameStop announced that Cohen had been won over to make the move to e-commerce. He chairs a special committee formed by the GameStop board to help transform it. Board members Alan Attal, Chewy’s former top operations manager, and Kurt Wolf, Hestia Capital Management’s chief investment officer, are also represented on the committee.
Naming Owens as COO is the latest in a series of recent staff moves. The committee has already appointed a chief technology officer, hired two executives to lead customer service and e-commerce fulfillment, and started the search for a new chief financial officer with tech or e-commerce experience. GameStop previously announced that current CFO Jim Bell will step down on March 26th. Citing sources familiar with the matter, Business Insider reported that Bell was marketed by Cohen.
GameStop announced Tuesday that its chief customer officer, Frank Hamlin, would be stepping down.
– With reports from Jesse Pound of CNBC.