GameStop ventures into the Bitcoin field but suffers a stock price decline; Q1 revenue falls short of expectations, dragging down performance

According to Zhitong Finance APP, despite achieving profitability for the fourth consecutive quarter, video game retailer GameStop (GME.US) saw its stock price drop more than 6% in after-hours trading on Tuesday due to first-quarter revenue falling short of Wall Street expectations, as consumers increasingly prefer digital downloads over in-store purchases.

The financial report showed that GameStop's first-quarter revenue decreased by 17% year-on-year, from $881.8 million in the same period last year to $732.4 million, while analysts had expected $750 million.

The company, headquartered in Grapevine, Texas, became famous for its stock price rollercoaster driven by the Reddit forum in 2021, and is now struggling to cope with the rapid changes in the gaming industry—consumer preferences are shifting from physical games to digital downloads, game streaming, and online shopping.

Although GameStop has expanded its e-commerce platform to include digital downloads and online merchandise sales, it has yet to fully capitalize on this transformation opportunity.

During the reporting period, revenue from the hardware and accessories segment, which includes sales of new and used video games, fell by about 32%. Following the closure of nearly 600 stores in the U.S. in 2024, the company announced it would close "a significant number" of stores this year, indicating that its retail business remains sluggish despite attempts at reform.

Through cost-cutting measures, the company achieved a net profit of $44.8 million (9 cents per share) in the first quarter, compared to a net loss of $32.3 million (11 cents per share) in the same period last year, marking the company's fourth consecutive quarter of profitability. Adjusted earnings per share reached 17 cents, far exceeding analysts' expectations of 8 cents.

In early May, GameStop sold its Canadian subsidiary, Electronics Boutique Canada, which was responsible for operating its stores and e-commerce business in Canada. The company expects the sale of its French operations to be completed within the 2025 fiscal year.

In this quarter, the company reported an operating loss of $10.8 million, which included a $35.5 million impairment charge related to international restructuring.

Notably, GameStop disclosed that it purchased 4,710 bitcoins using cash between May 3 and June 10. Earlier this year, GameStop's board unanimously approved an update to its investment policy, following the example of business software company Strategy (MSTR.US), to include bitcoin as part of its financial reserve assets.

As of Tuesday's close, GameStop's stock price has fallen 3.8% year-to-date, while the S&P 500 index has risen 2.7%