GameStop (GME) shares are soaring more than 30% after the electronics retailer posted its first quarterly profit in two years as it cut costs and reduced inventory.
GameStop reported fourth quarter earnings per share (EPS) of $0.16. Analysts had been anticipating a loss. Revenue fell 1.2% to $2.23 billion, although still above estimates.
The company noted that its selling, general, and administrative (SG&A) expenses were $434.4 million, or 20.4% of sales, compared to $538.9 million, or 23.9% of sales, in the fourth quarter of the previous year. GameStop also said it cut its inventory to $622.9 million from $915.0 million a year earlier, "reflecting the Company’s ongoing focus on maintaining a healthy inventory position."
Focus on Profitability
"The retailer has aggressively focused on profitability, while still pursuing pragmatic long-term growth," noted GameStop CEO Matt Furlong. He added that GameStop is taking further steps this year to improve efficiency and lower expenses, including in European markets, where it has already begun pulling out. Furlong added the retailer may consider selling higher-margin items such as toys.
GameStop is one of the meme stocks that have gone through wild gyrations in the past two years, driven by retail investors using social media to impact buying and selling. With today's gains, shares have now moved into positive territory for the year.