SAN RAFAEL, CALIFORNIA - DECEMBER 08: Customers enter a GameStop store on December 08, 2021 in San Rafael, California. Video game retailer GameStop will report third quarter earnings today after the closing bell. (Photo by Justin Sullivan/Getty Images)
GameStop said Wednesday that quarterly sales declined and losses widened, as it burned through cash and inventory swelled.
The video game retailer also disclosed a new partnership with crypto exchange FTX.
Shares of the company rose about 10% in after hours trading.
In the second fiscal quarter ended July 30, the company's total sales dropped to $1.14 billion from $1.18 billion in the year-ago period. Its losses widened to $108.7 million, or 36 cents per share, compared with a loss of $61.6 million, or 21 cents, a year prior.
GameStop's results cannot be compared with estimates because too few analysts cover the company. It did not provide a financial outlook and hasn't provided one since the start of the pandemic.
The brick-and-mortar retailer is trying to adapt its business to a digital world. It's gotten new leadership, including board chair Ryan Cohen, the founder of Chewy and former activist investor for Bed Bath & Beyond, and CEO Matt Furlong, an Amazon veteran. It's also looked to new ways to make money, including nonfungible tokens.
But the company has struggled to drive profits, leading it to trim costs and shake up leadership. Last month, it fired chief financial officer Mike Recupero and laid off employees across departments. Accounting chief Diana Jajeh stepped in as the company's new CFO.
Furlong urged patience on an investor call on Wednesday, saying GameStop must go through a significant transformation to keep up with customers.
"Our path to becoming a more diversified and tech-centric business is one that obviously carries risk and will take time," he said. "This said, we believe GameStop is a much stronger business than it was 18 months ago."
GameStop's new initiatives have come at a high cost. It had $908.9 million in cash and cash equivalents at the end of the quarter — a little more than half of what it had at the end of the year-ago period.
Inventory ballooned to $734.8 million at the close of the quarter. That's up from $596.4 million at the close of the prior year's second quarter. The company said in a release that it intentionally bulked up on merchandise to keep up with customer demand and cope with supply chain challenges.
Furlong said on the call that the company had to spend money to modernize its business after years of underinvestment. Among its moves, it hired more than 600 people with talent in areas such as blockchain while it reduced shipping times, so customers get purchases in one to three days.