What happened
Shares of GameStop (GME 2.56%) dropped 14% on Thursday as the market indexes fell hard over fears of what a second wave of coronavirus cases could do to the economy.
So what
GameStop reported earnings that came up short on analyst revenue and profit forecasts as the COVID-19 pandemic forced its stores to close. The video game retailer can't afford to go through another round of lockdowns.
Image source: Getty Images.
As its stores began to reopen in the current quarter, comparable-store sales improved to a 4% decline in May compared with the 17% drop seen in the first quarter. E-commerce growth also surged 1,400% higher, in line with data from Earnest Research, which said GameStop's online sales soared 1,500% between March 1 and April 10.
Now what
GameStop has a net cash position of just $18 million to last until the game-console upgrade cycle kicks in this fall. The company is essentially betting all its chips that new consoles from Microsoft and Sony will renew sales growth, and though there is reason to think this will occur, it can't afford a new COVID-19 outbreak to wreck the economy again.
Investors may be nervous that after having made it through the first downdraft, it might not survive a second.
