Please ensure Javascript is enabled for purposes of website accessibility

GameStop Falls Short of Analyst EPS Target Despite 800% E-Commerce Growth

By Rhian Hunt – Sep 9, 2020 at 7:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's shares ended the day down about 4.5%.

GameStop (GME -1.98%) today reported a scorching 800% surge in its e-commerce sales and a slight beat on revenue during the second quarter of 2020. Nevertheless, it missed analyst consensus forecasts for earnings per share. Investors already expected the video game and software retailer to take a heavy negative hit from the COVID-19 pandemic, and CEO George Sherman still says the "second quarter saw strong progress toward our strategic initiatives."

Net sales fell 26.7% year over year to $942 million, while the consensus estimate reported by Zacks Equity Research was $937.5 million and a 27.1% sales drop. GameStop therefore delivered a slim 0.48% positive surprise above analyst predictions. Looking at Q2 2019's $0.32 loss per share, analysts expected a $1.27 loss per share. Actual adjusted EPS amounted to a $1.40 loss per share, $0.13 higher than anticipated.

Assorted PC gaming equipment, including mice, a controller, headphones, and a keyboard.

Image source: Getty Images.

Sherman identified the company's 800% growth in e-commerce sales as a strongly positive sign for the future, also citing a 50% year-over-year drop in inventory. GameStop trimmed selling, general, and administrative expenses by $133.7 million. Net long-term debt was slashed nearly in half, from $419.1 million in Q2 2019 to $215.9 million in Q2 2020. Despite paying down considerable debt, the company ended the quarter with $735.1 million in cash, up approximately 73.4% year over year.

Looking forward, GameStop emphasizes the possibilities created by its newly constructed "frictionless digital ecosystem." While guidance remains officially suspended because of the ongoing pandemic, Sherman remarked, "We believe we are ready, with expanded service and payment options, to handle the expected surge in demand and participate in a very significant way in the console launches later this year."

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GameStop Stock Quote
$26.17 (-1.98%) $0.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.