GameStop, the roller-coaster stock championed by Reddit-based traders, tumbled in pre-market trading after posting disappointing fourth-quarter earnings that outweighed a trio of new executive hires.
Shares of the video game retailer fell 11 per cent to $161.60 as of 12:22pm UAE time on Wednesday after it reported profit in the period ended January 30 of $1.34 a share, excluding some items. That compared with an average projection of $1.43 from analysts.
Though a new generation of game consoles helped spur purchases, the company didn’t get as big a bump as expected. Net sales fell 3.3 per cent to $2.12 billion in the quarter, short of the $2.24bn estimate. Still, the console surge helped lift same-store sales by 6.5 per cent, with online revenue up 175 per cent.
GameStop named technology veteran Jenna Owens as chief operating officer, bringing on board the former Amazon.com and Google employee to steer its push into e-commerce. It also appointed two other executives with tech experience as part of a push by activist investor and board member Ryan Cohen to make the brick-and-mortar chain a digital powerhouse.
While investors were expecting more guidance from GameStop on its new strategic direction, the company declined to take questions on a call with investors late on Tuesday. Mr Cohen wasn’t on the call. And no forecasts were provided in its earnings statement.
“I don’t think the results matter much at this point – people will be looking to how they transform themselves from here to reduce the reliance on brick and mortar and expand e-commerce,” said Bloomberg Intelligence analyst Matthew Kanterman. “But this is no easy task, despite who they bring in to help drive the turnaround.”
Chief executive George Sherman said the company will focus this year on customer service and experience – both key components to a successful turnaround for GameStop.
“They’ve identified the key factors, but it’s still a matter of hearing more about the actual strategy to deliver unique value to customers. Hopefully, they add more to that discussion soon,” said Doug Clinton, managing partner at Loup Ventures.
Despite falling for the last four trading sessions in New York, GameStop shares are still up more than nine-fold this year through to Tuesday. The stock is pricing in an “optimistic scenario”, Colin Sebastian, an analyst at Robert W Baird & Co, wrote in a note, keeping the stock at a neutral rating.