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GameStop Corp (GME) Reports Narrowed Net Loss in Q3 2023

  • Net sales decreased to $1.078 billion in Q3 2023 from $1.186 billion in Q3 2022.

  • Net loss improved to $3.1 million in Q3 2023 from a net loss of $94.7 million in Q3 2022.

  • SG&A expenses reduced to $296.5 million or 27.5% of net sales, down from $387.9 million or 32.7% of net sales year-over-year.

  • Cash, cash equivalents, and marketable securities stood strong at $1.210 billion at the end of the quarter.

On December 6, 2023, GameStop Corp (NYSE:GME) released its 8-K filing, disclosing its financial results for the third quarter ended October 28, 2023. The company reported a decrease in net sales to $1.078 billion compared to $1.186 billion in the same period last year. Despite the decline in sales, GameStop saw a significant improvement in its net loss, which narrowed to $3.1 million from a net loss of $94.7 million in the prior year's third quarter.

Financial Highlights

GameStop's efforts to streamline operations were evident in the reduction of Selling, General, and Administrative (SG&A) expenses, which were $296.5 million or 27.5% of net sales, down from $387.9 million or 32.7% of net sales in the third quarter of the previous year. The company's balance sheet remains robust with $1.210 billion in cash, cash equivalents, and marketable securities, and long-term debt limited to a low-interest, unsecured term loan associated with the French government's COVID-19 relief efforts.

Income Statement Analysis

The condensed and consolidated financial statements revealed a gross profit of $281.8 million, a slight decrease from $291.6 million year-over-year. The operating loss was reduced to $14.7 million from $96.3 million in the prior year's third quarter. Interest income, net, was a loss of $12.9 million, compared to a loss of $3.7 million in the same period last year.

Balance Sheet and Cash Flow Statement

GameStop's balance sheet showed total assets of $3.146.9 million, with current assets including $909.0 million in cash and cash equivalents and $300.5 million in marketable securities. Total liabilities stood at $1.884.1 million. The cash flow statement indicated a net cash flow provided by operating activities of $19.1 million for the 13 weeks ended October 28, 2023, compared to $177.3 million in the same period last year.

Non-GAAP Measures and Other Metrics

GameStop also provided non-GAAP measures such as adjusted SG&A expense, adjusted operating loss, and adjusted net income (loss), which exclude certain transformation costs, asset impairments, and severance, among other items. The company believes these non-GAAP financial measures provide useful information to investors in evaluating the core operating performance.

While GameStop did not hold a conference call, additional information can be found in the company's Form 10-Q. The company's financial position and results of operations are subject to various risks, including changes in consumer behavior, supply chain interruptions, and the competitive nature of the industry, as detailed in the forward-looking statements section of the earnings release.

For value investors and potential GuruFocus.com members, GameStop's latest earnings filing indicates a company in the midst of a transformation, focusing on cost reduction and operational efficiency. The narrowed net loss and reduced SG&A expenses suggest progress, while the strong cash position provides stability as the company navigates the competitive and cyclical nature of the video game industry.

Explore the complete 8-K earnings release (here) from GameStop Corp for further details.

This article first appeared on GuruFocus.