Revenue decline+ “change of coach”, Game Station fell 19% after the market! Is the market not optimistic about change?

After the market on June 7 EST, which was previously famous for “retail group stocks”$GameStop (GME.US)$The financial report for the first quarter of fiscal year 2023 was disclosed, and some indicators for the period fell short of expectations.

Additionally, the company fired CEO Matt Furlong (Matt Furlong).

or affected by the above news,GameStop's stock price plummeted 19.23% after the market on the same day.However, the stock's recent overall performance has been good. Not counting the after-market decline on June 7th,Its stock price has risen by 40.75% since May 2.

Revenue declined year over year, but losses narrowed

GameStop (GameStop) is an American offline game retailer that mainly provides games, entertainment products and technology to customers in the US, Canada, Australia and Europe through its e-commerce assets and stores. The products include game CDs, game software, electronic accessories, etc.

In recent years, the company's situation has not been very good. The reason is that offline game retailers are facing difficulties similar to those in the department store industry. On the one hand, the development of digital technology has led to fewer customers, and the pandemic has also had an impact.

It is reflected in performance,GameStation's revenue has clearly dropped to a level since FY2019, and its net profit to mother has been in a loss since FY2018.

In the first quarter of fiscal year 2023,GameStation achieved revenue of US$1,237 million, a year-on-year decrease of 10.25%; net loss to mother during the period was US$50.5 million, a year-on-year decrease of 68.02%.

Looking at specific products,Hardware and accessories (new and used hardware, accessories, hardware sets, interactive game figures, strategy guides, mobile and consumer electronics) remain the mainstay of GameStation's performance.We achieved revenue of US$726 million in the first quarter of fiscal year 2023, up 7.72% year over year, accounting for 58.67% of total revenue.

whilesoftwares(New and used video game software, digital software, and computer entertainment software) contributed 338 million US dollars in revenue during the period, compared to 484 million US dollars in the same period last year.The decline in revenue from this product is the main reason for the decline in the company's overall revenue.

Also, in the first quarter of fiscal year 2023,Collectibles achieved revenue of US$173 million, down from US$221 million in the same period last year.

Looking at it by region,The US market is still the main battleground for game terminals, contributing 832 million US dollars in revenue in the first quarter.This is down from $995 million in the same period last year, and its share of revenue also fell from 72.2% to 67.3% this quarter.

In the first quarter, the Canadian market and the Australian market contributed revenue of 62.7 million US dollars and 115 million US dollars respectively, down from the same period last year, but their share of total revenue remained basically the same.

whileThe European market contributed 227 million US dollars in revenue in the first quarter, an increase of 26.2% year-on-year compared to 180 million US dollars in the same period last year, and its share of total revenue also increased from 13% to 18.3%.

According to financial reports, the increase in sales revenue in the European market is mainly due to sales of new gaming hardware driven by reduced supply restrictions.

Notably, GameStop initiated cost reduction measures and layoffs in FY2022 to improve operational efficiency. This practice also continued into the first quarter of fiscal year 2023.

According to the data,The company's cost of sales was reduced from $1.08 billion in the first quarter of fiscal year 2022 to $950 million in the current quarter.

In addition,GameStation's sales, general, and administrative expenses for the first quarter were US$346 million, which is also lower than US$452 million in the same period last year.

The company also said in its quarterly report that it will continue to explore strategic options.This could include further closure of stores and exit from unprofitable businesses.

It is worth mentioning that despite losing money year after year, Game Station still has plenty of cash flow.

GameStop said its main sources of liquidity are operating cash, cash on hand, and capital market loans, including the company's revolving credit lines. As of April 29, 2023,The total amount of unrestricted cash and cash equivalents on hand was $1,057 million, marketable securities were $253 million, and additional effective borrowing capacity under the revolving credit line was $436 million.

“Change of command” has attracted attention; the market is not optimistic?

After disclosing the quarterly report, Game Station also announced a “change of command” news.

The company fired CEO Matt Furlong (Matt Furlong). According to information, Matt Fulong joined GameStop in 2021.The performance of his game station has not improved significantly, but the stock price has dropped quite a bit.However, this is largely due to the fact that the stock had previously become a “retail concentration camp,” and the stock price was speculated to a high level away from fundamentals, and later fell normally, so the “pot” of the sharp drop in stock prices cannot be fully counted on Matt Fulong.

On the other side,GameStop appointed Ryan Cohen as the company's executive chairman and Mark Robinson as the company's new CEO, with the title of general manager.

The company said in its quarterly report that as executive chairman,Ryan Cohen will focus on capital allocation and supervision.

According to reports, billionaire Cohen has been the chairman of GameStop since 2021, and he is also a major shareholder of the company.

GameStop said that we believe in combining these efforts (including leadership changes) to stabilize and optimize our core business, achieve continuous profits, and focus on capital allocation under Cohen's leadership.It will further create long-term value for our shareholders.

However, like some market analysts, the market doesn't seem to be optimistic about the changes made by GameStation; its stock price plummeted 19% after the market, as evidenced by that.

Author: Tsubame 14

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