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GameStop ends 2019 with sales down year-over-year, but 'increased financial flexibility'

GameStop's end-of-year reporting for the 2019 financial year totes a newly strengthened balance sheet created by the year's cost-cutting and reboot efforts.

GameStop’s end-of-year reporting for the 2019 financial year totes a newly strengthened balance sheet created by the year’s cost-cutting and reboot efforts.

Those latest financial reports covering both the full year and fourth quarter ended February 1, 2020 show that sales are still on a downward slide compared to the year prior, but argue that the company enters 2020 with the financial flexibility needed to continue toward “sustainable profitable long-term growth.”

For the full year, GameStop notes that it managed to reduce its inventory by 31 percent by year end and both pay down its debt by $401 million and repurchase $38.1 million in shares using the proceeds from the sale of non-core business units.

As a whole, and keeping with US generally accepted accounting principles (GAAP), GameStop reported an operating loss of $399.6 million, up from 2018’s full-year operating loss of $702 million.

Net sales for the entire year came in at $6.5 billion, down from $8.3 the year prior, and split between hardware and accessories ($2.7 billion), software ($3 billion), and collectables ($737.5 million). As with most of GameStop’s past quarterly reports, sales for the full year are down year-over-year in both hardware and software but up just slightly for its collectable categories.

It’s a similar story for the quarter ended February 1, 2020; sales decreased from last year’s $3.1 billion to $2.2 billion, though sales were down across all three categories rather than just two. As with previous reports, GameStop CEO George Sherman attributes much of its declining sales to the end of the current console generation, and delayed purchasing by its customers due to anticipation for new consoles at the end of 2020.

Under its own non-GAAP supplemental reporting (explained in the full press release), the company reported $62.3 million in adjusted operating income for the year ending February 1, down from $331.3 million the year prior, but names the figure among its yearly highlights as it came amidst a “challenging sales environment.”

“While still early, we are pleased with the progress we have made to date in our initiatives to stabilize, optimize and transform the business, specifically the strengthening of our balance sheet," reads a statement from GameStop CEO George Sherman. "As such, we will maintain our focus on expense and inventory discipline so that we move forward with a strengthened platform to capitalize on the significant opportunities we see for growth.” 

It's worth noting as well that the 2020 financial year and Q4 both ended before United States-based companies began to feel the effects of the COVID-19 pandemic, though Sherman does lightly mention the coronavirus in his statement (“The COVID-19 outbreak has led to changes in how consumers work, play and learn and over the past few weeks, led to increased demand for our products”).

In the time since the close of the quarter, GameStop has been forced to close its storefronts in the US and pivot to only offer curbside pickups and online orders, but only after first arguing it was itself an ‘essential retailer’ and thus not required to close like many businesses in affected communities.

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