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Thursday, September 23, 2021

What caused GameStop Corp. (GME) stock to move down today?

GameStop Corp.(GME) stock price slumped on Tuesday, March 23, 2021. The GME lost 15.25% more in the after-hours session on Tuesday after losing 6.55% in the day session. The stock closed at $154.03 per share. The quarterly financial results announcement and corporate changes were the reason behind the slumping stock price.


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Recent Corporate changes:

The shuffling of the corporate team of GME is driven byits top shareholder, Chewy.com co-founder Ryan Cohen.

  • The board appointed veteran Jenna Owens as the new Chief Operating Officer
  • GameStop Corp was hit by another blow on Tuesday, March 23, 2021, when it announced that its chief customer officer Frank Hamlin will resign from the company on March 31.
  • GME management shuffle news came along with a highly anticipated fourth-quarter earnings report on Tuesday afternoon which also took the share price further down.
  • Last month GME Chief Financial Officer Jim Bell steps down as well.

Financial results announcement

On March 23, 2021, GME reported its financial results for the fourth quarter and the fiscal year ended January 30, 2021.

Fourth Quarter Financial Highlights

  • GME net sales for the reported quarter were $2.122 billion, compared to $2.194 billion in 4Q 2019.
  • The gross margin declined 610 basis points compared to the same quarter in 2019 and was 21.1% for the reported quarter.
  • The company reduced its selling, general and administrative expenses from  $511.7 million to $419.1 million for the reported quarter.
  • GME net income was $80.5 million, or $1.19 per diluted share compared to diluted earnings per share of $0.32 in the fiscal 2019 fourth quarter. Adjusted net income was $90.7 million or $1.34 per diluted share for the reported quarter.

Full-Year Financial Highlights

  • The GME net sales were $5.090 billion for the year 2020, compared to $6.466 billion in fiscal 2019
  • For the year 2020, the gross margin was 24.7% with a decline of 480 basis points compared to the prior year.
  • GME spent $1.514 billion in selling, general and administrative expenses compared to $1.923 billion from the prior year.
  • The company suffered an adjusted net loss of $138.8 million or $2.14 per diluted share compared to an adjusted net income of $19.1 million or $0.22 per diluted share in fiscal 2019.
  • The company suffered a net loss of $215.3million, or $3.31 per diluted share compared to a net loss of $470.9 million, or $5.38 per diluted share in the prior fiscal year.
  • GME had $635 million in cash and restricted cash compared to $513.5 million in cash and restricted cash in the prior year, as of January 30, 2021.

Conclusion: GME Video game retail business has been in decline for years. Despite the tough economic conditions, GME shares have skyrocketed in 2021. All eyes are now on Ryan Cohen to transition the company into an e-commerce business company. It would be a tough task for Ryan because the company reported a 30.1% revenue drop in the third quarter and also missed the analyst’s estimates in the fourth quarter.

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