GameStop reported a third-quarter profit on Tuesday, driven by its cost-saving initiatives, including store closures and a focus on selling higher-margin goods.
CEO Ryan Cohen previously announced the company’s strategy to operate with “a smaller network and more value-added” items to enhance sales and profitability. This approach resulted in a net income of $17.4 million for the quarter, a significant improvement from the $3.1 million net loss reported a year ago.
GameStop’s shares rose more than 2% in extended trading following the announcement.
The retailer has faced challenges in turning around its core business. It continues to struggle with declining sales of videogame hardware and collectibles while competing against online retail giants like Amazon and eBay.
The company also faces macroeconomic pressures, as consumers reduce discretionary spending amid persistent inflation and a sluggish recovery in the gaming market.
Wedbush Securities analyst Michael Pachter expressed skepticism about GameStop’s future, stating, “There is no turnaround, just stock sales to willingly foolish investors.” He added that the company’s core business appears unsalvageable.
Despite these challenges, GameStop shares have surged over 50% this year, fueled in part by the reemergence of stock influencer Keith Gill, known as “Roaring Kitty.” Gill’s return earlier in 2024 reignited enthusiasm among his followers, reminiscent of the 2021 meme-stock frenzy that saw GameStop shares skyrocket 1,600%.
The company capitalized on the recent stock price rally by raising approximately $3 billion through share sales earlier this year.
GameStop’s third-quarter revenue fell 20% to $860 million, down from $1.08 billion a year ago. However, its cash and cash equivalents increased to $4.58 billion, up from $4.19 billion in the previous quarter.