GameStop's (GME -15.03%) business took a serious hit from the COVID-19 pandemic closures but has emerged with a much stronger inventory position. The video game retailer said on Wednesday that revenue dove and losses mounted in the three-month period that ended in early May. Yet the chain is entering the next generation of gaming consoles with some encouraging momentum.
First-quarter revenue fell 30% at existing locations, GameStop revealed in an earnings report, and operating loss landed at $108 million compared to a gain of $18 million a year ago. Management noted several bright spots in the retailer's operating trends through the pandemic, though, including soaring digital sales and a sharp increase in demand since the second quarter started in early May. Executives said the e-commerce jump "reflects the loyalty of the GameStop customer and the confidence they place in us as their preferred place to shop."
GameStop suspects that the recent revenue jump might simply be a temporary boost tied to stay-at-home orders that have more people looking for home-based entertainment options. As a result, they declined to issue any specific guidance about the sales outlook.
But the company did manage to reduce inventory by 43% in recent months, which puts it in a flexible sales position just as Sony and Microsoft prepare to launch their new gaming consoles.