(Bloomberg) -- GameStop Corp. posted the biggest quarterly drop in revenue in two years, showing the struggling video game retailer’s efforts to boost digital purchases haven’t compensated for a decline in physical sales.
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Net sales fell 8.5% to $1.19 billion in the three months ended Oct. 29, lower than two analysts’ projections for $1.39 billion. The adjusted loss per share was 31 cents, worse than estimates for a 29 cent loss. Very few analysts cover the company, which is valued at $7 billion and whose stock is notoriously volatile.
Ryan Cohen, who joined the board and became chairman last year, has been trying to revive growth at Grapevine, Texas-based GameStop, which has slowed as gamers shift from buying game discs to digital downloads. Making matters worse, GameStop’s retail business was quashed during Covid lockdowns and results have been further hampered by supply constraints on consoles. And the broader gaming industry is in decline, with overall spending down 5% in the third quarter from a year earlier, according to industry researcher NPD Group.
Software sales declined 19% in the quarter to $352.1 million, while hardware and accessories sales fell 6.4% to $627 million. Collectibles were a bright spot, gaining 7.9% to $207.3 million.
Axios reported earlier this week that GameStop had started another round of job cuts, with an emphasis on the team building the company’s blockchain wallet. In July, GameStop also announced it was trimming an unspecified number of workers and ousted former Chief Financial Officer Mike Recupero. GameStop made no mention of job cuts in its earnings statement.
Cohen has been pushing GameStop into digital assets, but the strategy has proven to be a challenge. In September, the company announced a partnership with cryptocurrency exchange FTX US as part of its effort to shift into nonfungible tokens. The plan was to collaborate on new e-commerce and online marketing initiatives, and to carry FTX gift cards in select stores. But in November, FTX filed for Chapter 11 bankruptcy after imploding with $9 billion of liabilities, sending the crypto market into a tailspin.
GameStop doesn’t hold “a material balance of any token,” Chief Executive Officer Matt Furlong said in a call with analysts. “We have not and will not risk meaningful stockholder capital in the space,” Furlong added. He said he believes that there is still a future for the digital assets.
During the pandemic, GameStop became emblematic of the so-called meme-stock craze whereby retail traders bid up the price of certain companies, prompted by chatter on Reddit and other social media outlets, rather than business fundamentals. The shares, which are down 40% this year, fluctuated after the report and were up about 1% in extended trading Wednesday.
(Updates with comments from CEO in seventh paragraph)
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