• GameStop plans to sell up to 45 million additional shares of its common stock
• GameStop reported preliminary first-quarter results showing a decline in sales compared to the same period last year
• GameStop shares fell sharply, dropping around 20% after the announcement to sell more shares and the disappointing sales figures
GameStop recently reported a decline in preliminary first quarter sales and plans to sell additional shares, sending its stock price tumbling. The video game retailer has faced growing competition from online sellers.
First Quarter Sales Drop
GameStop said its preliminary net sales for the first quarter of 2024 are expected to be between $872 million and $892 million, down from $1.24 billion in the same period last year. The company’s net loss is projected at $27 million to $37 million, compared to a $505 million loss a year earlier.
Additional Share Sale Planned
GameStop announced plans to sell up to 45 million common shares through an at-the-market offering. The company has struggled with declining sales at its brick-and-mortar stores. GameStop is aiming to cut costs through layoffs and closing underperforming locations.
Share Price Falls Sharply
After briefly surging earlier this week, likely fueled by social media posts, GameStop’s share price tumbled 25% on Friday following the company’s announcements. The meme stock rally quickly faded, with the stock erasing most of its gains from earlier in the week.
Analysts Skeptical on Profitability
Analysts remain doubtful about GameStop’s ability to return to profitability given the competitive pressures it faces. Wedbush analyst Michael Pachter said the company is “not in a position to be profitable” and expects GameStop to continue losing money absent a clear plan to grow revenue and profits.
Conclusion
GameStop faces a difficult path ahead as the video game industry shifts online, putting pressure on the company’s core retail business. GameStop is attempting to cut costs but analysts are skeptical profitability can be restored without sales growth.
