GameStop Q3 Earnings Beat Despite Sales Decline of 20% Y/Y

Core Insights - GameStop Corp. (GME) reported third-quarter fiscal 2024 results, with net sales missing estimates and declining year over year, while adjusted earnings per share exceeded expectations and improved from the previous year [1][2]. Financial Performance - Adjusted earnings per share were 6 cents, surpassing the Zacks Consensus Estimate of break-even earnings [2]. - Net sales totaled $860.3 million, falling short of the consensus estimate of $900 million and decreasing by 20.2% from $1,078.3 million in the same quarter last year [3]. - Sales across all categories contributed to the decline in consolidated net sales [3]. Sales Breakdown - Hardware and accessories sales dropped 28% to $417.4 million from $579.4 million year over year [4]. - Software sales were $271.8 million, down 15.4% from $321.3 million in the prior year [4]. - Collectibles sales decreased 3.7% to $171.1 million from $177.6 million in the year-ago quarter [4]. - Geographic sales declines included 24.5% in Canada, 22% in Europe, 20.4% in the United States, and 12.5% in Australia year over year [4]. Margin and Expense Analysis - Gross profit decreased 8.7% to $257.2 million from $281.8 million in the year-ago quarter, but gross margin expanded by 380 basis points to 29.9% compared to 26.1% in the previous year [5]. - Adjusted selling, general and administrative (SG&A) expenses fell 4.4% to $281.8 million from $294.9 million year over year, with SG&A expenses as a percentage of net sales rising to 32.8%, up 550 basis points from 27.3% [6]. - The adjusted EBITDA loss was $11.2 million, a decline from an adjusted EBITDA of $5.1 million in the same quarter last year [6]. Operating Loss - The adjusted operating loss was $24.6 million in the reported quarter, compared to an adjusted operating loss of $13.1 million in the prior-year period [7]. Cash and Debt Position - GameStop ended the fiscal third quarter with cash and cash equivalents of $4.58 billion, marketable securities of $32.8 million, and net long-term debt of $9.6 million [8]. - Stockholders' equity stood at $4.8 billion, with merchandise inventory totaling $830.2 million, down from $1,021.3 million in the same period last year [8]. Cash Flow and Equity Offering - Net cash flow from operations was $24.6 million, up from $19.1 million in the prior-year period, with free cash flow totaling $20 million [9]. - Capital expenditures amounted to $4.6 million, and the company raised approximately $400 million through the sale of 20 million shares in its equity offering program [9]. Stock Performance - GameStop's shares rose 3% in after-market trading, with a 41.3% increase over the past three months, outperforming the industry's 17.4% growth [10].