GameStop Gaps Down Amid Console Demand

“Overall, we remain confident in our strategy and look forward to executing in 2021 on the many exciting opportunities to leverage our brand, extensive loyalty member base, and increased digital capabilities to expand our addressable market and product offerings, providing growth in all things games and entertainment,” — CEO George Sherman

GameStop’s Q3 sales dipped 30% from 2019 causing the stock to follow suit in after-market trading. The gaming retailer [$GME] reported a loss of $18.8 million, or 29 cents a share. Delivered ahead of estimates calling for a loss of 85 cents a share.

Sales of $1 billion came up short of estimates calling for $1.1 billion. Comparable sales fell 24.6% YOY. These mishaps were pretty much expected given the quarter ended in October; precisely one month before Sony [$SNE] and Microsoft [$MSFT] launched their new gaming consoles. But the slump in comparable sales was still larger than estimates that called for a 20.5% nosedive. [Here’s Why Activision Blizzard is Suing Netflix]

GameStop also said it’s arranging a shelf registration and prospectus supplement with the SEC that would enable it to sell stock through at-the-market offerings. This would essentially be the contrast of those sketchy stock buybacks that usually lead to a dilution in existing shares.

In-Store Stock of PS5 and Xbox Series has been limited ahead of Christmas.

“We believe the shelf registration and associated at-the-market program, if we chose to use it, provide us further options to enhance our liquidity alternatives to support an efficient and successful execution of our transformational strategies,” CFO Jim Bell said in the earnings release.

Toward the end of October, the company had $602.6 million in cash and restricted cash, nearly double from 2019. Moreover, it had $269.5 million of short-term debt and $216 million of long-term debt on its balance sheet. In December, they plan a voluntary early redemption of $125 million in principal amount of its 6.75% senior notes due in 2021.

GameStop provided some optimism as investors anticipate the launch of new gaming consoles. November same-store sales jumped 16.5% YOY—though presumably November’s totals included sales from the new PlayStation 5 Digital Edition and Xbox Series S. Neither of these consoles have disc drives, which would virtually cut out GameStop’s lucrative business of buying and selling used games. [Here’s What Dr. Burry is Buying During the Pandy]

$GME is trading at $13.66 after puking from its 2020 high of $19.42 on November 30.