GameStop (GME) plunges as Q2 results fell short of targets

After reporting a lower-than-expected second quarter 2020 results yesterday, GameStop (NYSE: GME) stock declined in the extended hours of trading and it continued to bleed today in the pre-market session. GME stock was trading down more than 10% in the before market hours today.

July quarter results

The omnichannel video retailer’s non-GAAP loss in the second quarter expanded to $1.40 per share from a loss of $0.32 per share in the prior-year quarter. Sales declined by 27% to $942 million. Comparable sales declined 12.7% in the second quarter, a sixth consecutive quarter of negative growth.

Temporary store closures related to COVID-19 resulted in 13% fewer store operating days in the quarter versus second quarter last year. July quarter sales were negatively impacted by both the global pandemic and the last few months of a seven-year long hardware cycle.

Limited new hardware availability constrained sales in the quarter as the early surge in demand, coupled with both the pandemic impacts on the supply chain and the end of the Generation 8 cycle, created a significant limitation on new hardware and accessories availability from suppliers.

Surge in e-commerce sales

As the pandemic shutdown began, there was a dramatic shift toward e-commerce. For GameStop, global e-commerce sales jumped 800% in the recently ended quarter.

Also check: How Activision Blizzard (ATVI) played in Q2

Looking ahead

Due to COVID-19, GameStop didn’t provide formal guidance. The company expects several key software titles move into Q4 from Q3. With the postponed new product launches, GameStop expects sales to be choppy for the remainder of the third quarter.

Digital gaming has been growing tremendously in recent months. However, GameStop expects significant increases in work-from-home activities will lead to increased taxation on broadband and result in trade-offs on broadband usage, a natural advantage for physical gaming. So, the company expects the life of physical gaming to stay here for the foreseeable future. GameStop also plans to double its efforts on digital game sales, including subscription offers.

Later this month, GameStop expects to launch its newly redesigned mobile app.

Stock performance

GME stock, which reached a new 52-week high ($8.45) last Thursday, had advanced 77% in the past 30 days and 45% in the last three months. Peer Activision Blizzard (NASDAQ: ATVI) had gained 8% in the past three months.

Read the entire transcript of GameStop (GME) Q2 2020 earnings call