GameStop Corp. is facing a whirlwind of challenges. The beloved stock among retail traders took a hit early Wednesday morning, now down over 20% for the year and nearly 50% in the last twelve months. This downturn follows the company's Q4 earnings report and more job cuts. Let’s delve into the details.
Everyone’s favorite meme stock, GameStop (NYSE:GME), is encountering significant selling pressure. The company disclosed its earnings for the fourth quarter, revealing a 19% decline in revenue compared to the previous year, resulting in a 15% drop in GME stock, now trading below $13 per share.
As shown in the chart, just a day earlier, the company's stock surged by 15%, marking its best performance in several months. However, GameStop's positive momentum was short-lived.
GameStop missed Wall Street’s expectations. During the fourth quarter, the company reported revenue of $1.79 billion, falling below the expected $2.05 billion. Earnings were also disappointing, with the darling of retail traders earning 22 cents per share, more than 26% below Wall Street's forecast of 30 cents per share.
Like other retailers, GameStop hasn’t been immune to persistent inflation. The retailer witnessed a decline in sales across its hardware and accessories categories, including software and collectibles.
Hardware and accessories sales, encompassing Playstations, Xbox, and Nintendo Switch consoles, plummeted by 61% to $1.09 billion during the recent quarter. Meanwhile, software sales, covering both new and pre-owned gaming software as well as game downloads, dropped by 26% to $465 million. Even collectibles saw a decline of 13% to $277 million.
Investors are also closely monitoring the recent round of job cuts announced by the company in a regulatory filing associated with this earnings release.
With a current workforce of approximately 8,000 full-time employees and between 13,000 and 18,000 part-time employees, the company is undoubtedly burdened, and various avenues are being explored to trim costs and manage cash flow. However, additional layoffs are likely to lead to more store closures over time. The company has transitioned from a state of abundant investment to one of aggressive cost-cutting, which does not bode well for its growth prospects.