GameStop Earnings: GME stock offers up major earnings loss

GameStop (GME) stock spiked 5.9% afterhours on Wednesday to $128.50 after it reported a major earnings loss for the first quarter, but as the market digested the results the brief spike fell back down to earth and went flat ahead of the earnings call.

The much-followed meme stock reported an adjusted earnings per share (EPS) loss of $2.08. This missed the forecast of $-1.22 by a long shot –86 cents off target to be exact. Revenue was the only positive sign, with sales of $1.38 billion beating the Wall Street forecast by $60 million. Shares were down 2.7% to $121.40 in the regular session. 

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Revenue grew 7.8% YoY, which management said reflected both expanding and new brand relationships. The company greatly increased inventory compared with Q1 2021. It grew from $571 million to $918 million in the first quarter. 

Despite the net loss of $157.9 million, GameStop finished the quarter with $1.035 billion in cash on the books and no debt of note. The loss was more than twice as big as the loss in the first quarter one year ago, which was $66.8 million or $1.01 per share. The expanding loss was a result of the cost of goods sold (COGS) rising from 74% of net sales to 78%. Additionally, administrative expenses rose from 29% to 32.8% of net sales. This resulted in the net loss of 11% rather than 3% of net revenue. The gross margin dropped from 25.9% to 21.7% YoY.

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