GameStop Stocks Fall 2.3% After Earnings Report — Makes Sense Due to Digital Expansion Efforts
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GameStop Stocks Fall 2.3% After Earnings Report — Makes Sense Due to Digital Expansion Efforts

GameStop aggressively invested in expanding its business during Q3, which explains its widened losses.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

GameStop reported widened losses for the fiscal third quarter, spurring a slight sell-off which dragged the shares of the video game retailer down by more than 2%. However, a look at the company’s spending throughout the quarter reveals that this was inevitable. 

During the course of Q3, GameStop made several “long-term” investments, including a foray into the world of non-fungible tokens (NFTs), blockchain, and Web 3.

GameStop Reports Losses of $105 Million

GameStop’s earnings report on Wednesday revealed wider losses than expected. The company stated that its net losses increased to $105.4 million in net income. In contrast, net sales increased by 29% to $1.3 billion in Q3 from $1 billion a year earlier, beating expectations. On average, analysts projected $1.19 billion in net sales in Q3. GameStop noted that they have established or expanded relationships with some new brands, including Samsung, LG, Razer, and Vizio, which explains the growth in sales. 

The retailer pointed out that they have been trying to get ahead of supply chain problems by buying up a large supply for the holidays. By the end of October, the company’s inventory was worth $1.14 billion, while last year in the same period their inventory was worth $861 million.

Nevertheless, the company’s share price reacted negatively to the news, falling by as much as 4% in extended trading on Wednesday. As of now, however, the video game retailer has recovered some of the losses. GME shares are trading at $173, down by around 2.3% over the last 24 hours. 

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GME Plans for Expansion into Numerous Industries

During the earnings call, Matt Furlong, CEO of GameStop, noted that the company continues to “grow across categories and new areas.” Furling added that they have made long-term investments in infrastructure, talent, and technology.

In fact, the company has opened new offices in tech hubs like Seattle and Boston in a bid to attract top talent. Back in November, the company even entered into an agreement with a syndicate of banks for a $500 million asset-based credit facility to improve its liquidity. 

Moreover, GameStop intends to pivot towards an e-commerce retailer and away from its current “bricks and mortar” business model. To achieve this, the company has onboarded several top talents. For instance, the retailer has hired Matthew Furlong and Mike Recupero, as CEO and COO, respectively. Furlong said during the call:

“We believe our emphasis on the long term is positioning us to build what will ultimately become a much larger business relative to where we are in 2021. We’ve also been exploring emerging opportunities in blockchain, NFTs, and Web 3.0 gaming” 

As covered by The Tokenist, GameStop posted eight NFT and “Web3 gaming” job positions. While the company’s intentions remain largely unknown, the job descriptions detailed a metaverse-esque future for the gaming industry.

Furlong said during the earnings call that the company has recruited specialists with experience in e-commerce, UI/UX, blockchain, operations, and supply chain. He added that they have hired over 200 senior employees from some of the major technology companies. 

“We continue to see a customer-first culture taking hold throughout our stores, fulfillment centers and corporate offices. Maintaining this emphasis on the customer will remain key as we work to grow across categories and new areas.”

Loopring Rumor Continues to Fuel Speculation

During the call, GameStop’s CEO clearly stated that they have been exploring opportunities in “blockchain, NFTs, and Web 3.0 gaming.” While the company has not disclosed its plans, one of the major possibilities is a partnership with the low-cost L2 solution Loopring

In late October, a source code from Loopring’s new web application contained a link to GameStop, suggesting that the L2 solution could be on the verge of announcing a partnership with the gaming retailer. The news is still speculation, though it is worth noting that neither GameStop nor Loopring has denied it.

Meanwhile, some users have been compiling evidence to support the possible partnership between GameStop and Loopring. More recently, Jackson Hunter, a Youtuber, tried to connect all the dots and prove that the partnership is actually slated to happen. 

After doing some research, Hunter shows evidence that there are some ties between people in Loopring and GameStop. He also revealed that Loopring has mentioned “an established partner who is building atop” its L2 NFT functionality several times, without disclosing who that partner is. 

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