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GameStop Corp (NYSE:GME) shares experienced a decline in aftermarket trading despite the company reporting its first profitable second quarter in seven years.
For the three months ending in June, GameStop achieved net income of $14.8 million, a significant turnaround from the $2.8 million loss recorded in the same period the previous year. Earnings per share (EPS) were reported at $0.01, surpassing analysts' predictions by $0.10.
The profitability was achieved despite a notable drop in net sales, which fell to $798.3 million from $1.164 billion year-over-year, missing revenue forecasts by $97.37 million. This decline in sales was a key point of concern.
A significant contributor to the positive net income was a reduction in selling, general, and administrative (SG&A) expenses. These expenses decreased to $270.8 million from $322.5 million last year. However, the proportion of SG&A expenses relative to net sales increased to 33.9%, compared to 27.7% in the previous year.
Additionally, GameStop's robust cash position, totaling $4.2 billion, provided a buffer through interest income generated from these reserves. This income helped offset some of the operating losses.
The achievement of profitability marks a significant milestone for GameStop, which has faced challenges over recent years due to shifts in consumer behavior and intensified competition from online platforms. Despite the positive financial results, GameStop's shares fell by 10.6% in premarket trading on Wednesday.
