(CTN News) – Analysts anticipate a profitable quarter when GameStop reports its Q4 fiscal 2024 results on March 18th.
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Under CEO Ryan Cohen’s leadership, the company’s pursuit of profitability involves reorganizing its cost structure and improving its inventory management.
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In anticipation of an update on the number of shares registered directly with GameStop’s transfer agent, GameStop’s loyal retail shareholders are waiting with bated breath.
GameStop earnings for the fourth quarter
GameStop (GME) will report its Q4 fiscal 2024 results after the market closes on March 18th.
A third analyst covering revised his earnings projections upwards for Q4 after the company released its Q3 results three months ago.
The consensus estimate is $0.28 per share. It would be an increase of nearly 73% over the same period last year. In contrast, revenues are expected to drop 7.1% to $2.08 billion.
This would be GME’s first annual profit since 2018 if the consensus EPS estimate is met.
The company’s management would have pursued profitability throughout 2023, including initiatives to restructure its cost structure and improve inventory management.
GameStop has adopted an extreme frugality stance under CEO Ryan Cohen.
As online sales dominate the gaming industry, revenues are expected to decline. The collectibles segment, however, will see strong margins due to robust holiday season demand.
Fundamental investors should examine GME’s SG&A and COGS lines. Despite declining product demand, these have been crucial to the company’s profitability.
SG&A expenses for the third quarter of this year were $296.5 million, compared to $387.9 million last year. Q4 is expected to see the cost-cutting trend persist as structural optimization bears fruit.
A significant improvement over $94.7 million loss in 2022 was revealed by the company’s third quarter 2023 net loss of $3.1 million.
For FY 2023, GameStop would coast to an $81.9 million net profit if it hits its consensus $85 million net profit for Q4.
GameStop’s balance sheet and investments
Under Ryan Cohen’s leadership, GameStop is poised to allocate its $1 billion cash reserve to equity investments rather than to core business operations, as the company has recently changed its investment policy.
In light of e-commerce giants’ fierce competition and the digitization of physical media, this strategy seems logical to brick-and-mortar retailers.
In order for to change its business fundamentals and expand beyond video games and collectibles, Cohen and his team believe it is imperative to diversify its business portfolio. During the company’s Q4 earnings call, the company may outline the company’s first steps in this direction.
According to GameStop, approximately 40% of its leases – mostly physical stores – are set to expire in fiscal 2023, which indicates such a shift may already be underway. Approximately 16% expire after 2027.
A near-term focus shift is possible for GameStop. Making new equity investments could be made through the company’s streamlined retail operations.
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