GameStop Corp. GME, a major holding of Michael Burry’s Scion Capital Management, plunged as much as 8% in aftermarket trading on Tuesday on the heels of reporting a double-digit decline in comparable store sales for the three months ending May 2020, the company’s fiscal first quarter.
For the quarter, the company reported a net loss of $165.7 million, or $2.57 per diluted share, compared with net income of $6.8 million, or 7 cents per diluted share, in the prior-year quarter. An adjusted loss of $1.61 per share was worse than the consensus estimate of a loss of $1.18 per share.
Total comp store sales decline due to coronavirus even though e-commerce sales skyrocket
The Grapevine, Texas-based video game retailer announced on March 22 a temporary shutdown of its 3,526 stores in the U.S. in light of the Covid-19 outbreak, which has sickened over 7 million people around the globe according to John Hopkins University statistics as of Sunday. During the final six weeks of the quarter, 90% of the company’s stores around the globe were closed to foot traffic, with stores in Australia the only ones fully open.
GameStop’s total global store sales declined approximately 30% during the quarter, with approximately 13% of the decline attributable to the impact of the closed stores due to the coronavirus outbreak. Despite this, global e-commerce sales skyrocketed 519% during the quarter and over 1,400% during May on the strength of the company’s digital ecosystem.
Stock trends lower on worse-than-expected net loss
Shares of GameStop traded at an aftermarket low of $4.50, down over 8% from the closing price of $4.96 on the comparable sales decline and worse-than-expected net loss.
GuruFocus ranks GameStop’s financial strength 5 out of 10, weighed down by debt ratios that are underperforming over 80% of global competitors despite a satisfactory Altman Z-score of 2.42. Other warning signs include contracting revenue and profit margins: Gross margins, which have declined approximately 1.3% per year on average over the past five years, declined 2.70% from the prior-year quarter on the back of an increased mix of hardware.
Burry’s Scion Capital Management, one of over 4,000 gurus available to our Premium Plus members, owns 3 million shares of GameStop as of the March quarter. Other gurus that have holdings in GameStop include Lee Ainslie (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Disclosure: No positions.
Read more here:
- Stanley Druckenmiller’s Top 5 Holdings as of the 1st Quarter
- Michael Burry’s Firm Axes Alphabet, Buys 5 Stocks in the 1st Quarter
- Carl Icahn Takes Over $1.6 Billion Loss on Embattled Hertz
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
