GameStop (GME) Is Up Over 6500% Over The Last Year – Does That Mean The Company Is Actually Doing Better?

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Last Updated on April 2, 2021 by Mark P.

It wasn’t that long ago, so most everyone probably remembers the Reddit fueled Wall Street battle for GameStop that happened earlier this year. Thanks to very large number of people trying to bump up the chain’s value, GameStop’s stock value is actually ten times higher right now than it was at the beginning of 2021. One might think this was actually a good thing for the company, having good value after the debacle that was 2020, but unfortunately, this stock increase has very little to do with the actual performance of the business. This is made pretty clear by GameStop’s fourth quarter and 2020 fiscal year results.

During the fourth quarter, net sales were $2.122 billion, which is a minor decline from the same quarter of the previous year at $2.194 billion, and an overall miss compared to the expectations of financial analysts. Taking the entirety of the year into consideration, net sales were $5.090 billion, compared to $6.466 billion in 2019. Store sales of the comparable variety dropped 9.5% for the entire fiscal year, though it’s worth noting that online e-commerce sales increased by a whopping 191%, which is probably to be expected considering the pandemic.

However, that increase in online sales doesn’t change the fact that Profit actually went down during the pandemic, which leads to a decently large spike in sales within the video game industry. On top of that, 2020 saw the launch of a new generation of consoles for both Xbox and PlayStation, which also generally leads to an increase in video game sales. It’s not good to have a decline when two major positive influencers have occurred.

On top of that, GameStop cites store closures as a major reason for the decline in sales: this includes both permanent closures it had planned before COVID even happened, but also temporary closures caused by the pandemic.

What this all means is that, despite GameStop stock still being high at $181.75 per share at the end of Tuesday, that high stock value is mostly due to other factors, not the actual good performance of the business itself. In regards to after-hours trading, GameStop’s share price rose to $197 before dropping down to $161, at least since the last time we checked.

GameStop didn’t address the crazy situation that led to its massive stock increase, but GameStop CEO George Sherman did his best to call attention to some of the best points of their earning report. “I am proud of how our entire organization came together in 2020 to adapt to the challenging pandemic environment, effectively serve our customers’ demand for gaming and entertainment products, and navigate through the year with strong liquidity and a strengthened balance sheet. Our execution led to a profitable fourth quarter that included a 6.5% comparable-store sales growth, a 175% increase in global E-Commerce sales, and a $92.6 million reduction in SG&A. The past year also saw us take steps to accelerate our de-densification efforts and streamline our store footprint, leverage our retail locations to provide same-day delivery and curbside pickups, and continue to enhance our suite of E-Commerce platforms.”

Soon after that earnings report was released, GameStop announced that Jenna Owens, the previous Amazon director, and general manager for distribution and multi-channel fulfillment, is now the new chief operating officer for GameStop.