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GameStop Sales Beat Estimates With Shift to Crypto and NFTs

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(Bloomberg) -- GameStop Corp. reported mixed results in the first quarter as the gaming retailer shifts to cryptocurrencies and nonfungible tokens.

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Net sales rose 8% to $1.38 billion in the three months ended April 30, the company reported in a statement on Wednesday, better than the $1.33 billion analysts estimated. But the company also reported its net loss more than doubled to $157.9 million. The adjusted loss of $2.08 per share, missed analysts’ average estimate for a loss of $1.16, according to data compiled by Bloomberg. Shares initially rose as much as 9% in extended trading before giving up those gains.

Ryan Cohen, who joined the board and became chairman last year, has been trying to revive growth at beleaguered GameStop, which has slowed as gamers shifted from buying game discs to digital downloads. The company became the poster child for so-called meme stocks, seeing volatile swings in the stock price over the last year that have little to do with its business fundamentals.

Cohen hasn’t said much publicly about his plans to push GameStop into the volatile world of cryptocurrencies, but earlier this month the company launched a digital asset wallet that will allow gamers to store, send and receive cryptocurrencies and NFTs without leaving their web browser. The wallet will be used in GameStop’s new NFT marketplace, expected to launch in the current quarter.

Analysts aren’t fully convinced that the company, which has struggled to transition from a brick-and-mortar game retail store, will become a leader in the NFT market. The recent selloff in cryptocurrencies hasn’t helped the picture for GameStop’s new initiatives.

“Our skepticism is rooted in its lack of presence in mobile, control by larger peers over their respective mobile and console walled gardens, and the fact that GameStop has only begun to attempt to penetrate the PC market, where the NFT competitive landscape is more open,” Michael Pachter, an analyst at Wedbush Securities, wrote in a note to clients before the results were released.

The shares are down about 52% in the past year, compared with about a 2% decline in the S&P 500 Index.

GameStop has suffered from a combination of supply chain issues and an opaque business strategy. Over the last several years, it has churned through a variety of business concepts with mixed reactions from investors and customers. Under Cohen, the company has been expanding its offerings, improving logistics and making a series of new hires with e-commerce and technology experience. That includes Chief Executive Officer Matt Furlong, who came from Amazon.com Inc. where he managed the Australia business, and Nir Patel, who was named chief operating officer.

GameStop said inventory was $917 million at the close of the quarter, compared with $570.9 million a year earlier, reflecting an improvement in levels of merchandise in stock “to meet increased customer demand and offset supply chain” challenges.

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