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GameStop (GME) details plan for attaining profitability in the near-future

The company is taking steps which include improving margins through an increased emphasis on higher margin collectibles and pre-owned products.

Morgan Shaver

December 7, 2022 2:25 PM

Jeff Roberson, Associated Press

GameStop (GME) shared a wealth of information today for its third quarter ending on October 29, 2022. Alongside details reflecting things like the company’s earnings and revenue results missing EPS expectations, GameStop offered up a plan for attaining profitability in the future.

In terms of what GameStop is considering, it first notes that it primarily focused on “rebuilding the company’s decaying infrastructure” during the period as well as strengthening its value proposition. Moving forward, GameStop is planning further action with a number of steps listed.

Statement from GameStop (GME) on attaining profitability in the near future — © GameStop (GME)

Among these are ones that point to ensuring the company’s cost structure is “sustainable relative to revenue” which includes optimizing its workforce and improving margins via operational discipline with an “increased emphasis on higher margin collectibles and pre-owned product categories.”

The initial phase of GameStop's transformation largely occurred over the course of 2021 and the first half of 2022. This period was primarily focused on rebuilding the Company's decaying infrastructure and strengthening GameStop's value proposition, including investing in the Company's enterprise systems, technology capabilities, Store Leaders and store associates, and product catalog and offerings. GameStop has entered a new phase of its transformation during the back half of 2022.

As a result, GameStop is focused on two overarching goals: attaining profitability in the near-future and generating sustainable growth over the long-term. We are taking the following steps, with a significant emphasis on cost containment:

• Ensuring the Company's cost structure is sustainable relative to revenue, including taking steps to optimize our workforce to operate efficiently.
• Improving margins through operational discipline and increased emphasis on higher margin collectibles and pre-owned product categories.
• Prudently increasing the size of our addressable market by growing our product catalog across PC gaming, collectibles, consumer electronics, toys, augmented reality, virtual reality and other categories that represent natural extensions of our business.
• Sustaining a superior customer experience supported by a seamless in-store and ecommerce experience with speedy delivery to our customers.

By executing on these priorities, we can create a compelling experience for customers and be positioned to invest pragmatically in growth initiatives. We can also maintain a strong balance sheet. In connection with our cost reduction efforts, we expect to see favorable impacts to our selling, general and administrative ("SG&A") expenses in the quarters to come as we pursue profitability. We believe these efforts are critical to achieve sustained profitability to enable long-term value creation for our stockholders.

GameStop (GME) stock showing shares at 22.26 down 1.13 percent and 22.48 in after hours trading up 0.22 percent — © Yahoo Finance

Overall, it’s interesting to see GameStop reflecting on attaining profitability in the future, and in particular, that it’s considering steps such as an increased focused on higher margin collectibles and pre-owned products. For more on this, be sure to check out the report from GameStop (GME).

For more on the Q3 2022 earnings report for GameStop (GME), brush up on some of our previous coverage including how GameStop (GME) cash on hand decreased by $97.5 million in Q3 2022, and how GameStop (GME) Q3 2022 earnings and revenue results missed on expectations.

Morgan Shaver

Senior Editor

Morgan is a writer from the frozen wastelands of Maine who enjoys metal music, kpop, horror, and indie games. They're also a Tetris fanatic who's fiercely competitive in games like Tetris 99... and all games in general. But mostly Tetris. You can follow Morgan on Twitter @Author_MShaver.

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