Grapevine-based GameStop Corp. reported mixed results in the second quarter but showed it’s leaning into a strategy shift toward nonfungible tokens by announcing a partnership with cryptocurrency exchange FTX US.
Net sales were $1.14 billion in the second quarter, the company said in a statement Wednesday. Analysts were expecting $1.28 billion. The company’s net loss nearly doubled to $108.7 million. GameStop hasn’t reported a quarterly profit since the end of 2021.
At the same time, GameStop said it will collaborate with FTX US, one of the biggest cryptocurrency exchanges, on new ecommerce and online marketing initiatives, and will begin carrying FTX gift cards in select stores. The financial terms of the partnership are not being disclosed. GameStop shares rose about 13% in extended trading.
Gamers are among the NFT industry’s biggest target audience. In June, the company launched a digital asset wallet to allow gamers to store, send and receive cryptocurrencies and NFTs, and in July it rolled out an NFT marketplace, despite the fact that sales of such digital artworks have declined amid the crypto industry crash.
FTX US recently launched a stock trading service to all U.S. users, including non-crypto investors, in a move to expand its customer base and increase assets under custody. It has also partnered with Reddit to enable crypto payments by Reddit users.
The partnership with GameStop also unites two companies with a shared link: Robinhood Markets Inc., the free trading app that investors used to bid up the price of GameStop shares in last year’s meme stock rally. FTX US founder and Chief Executive Officer Sam Bankman-Fried took a 7.6% stake in Robinhood earlier this year.
GameStop’s strategy has swerved several times in recent years as game sales have moved away from physical discs to downloads online. Much of its retail business was quashed during Covid lockdowns and results have been further hampered by supply constraints on consoles. Overall spending on gaming fell 13% in the second quarter from a year earlier, according to industry researcher NPD Group.
While it still sells games, hardware and toys, GameStop’s leadership has been pushing the company into new avenues of growth with underwhelming results so far. In June, the company launched a digital asset wallet to allow gamers to store, send and receive cryptocurrencies and NFTs. In July, GameStop rolled out its NFT marketplace during a major downturn for the crypto industry. On its first day, the marketplace earned $44,500, according to Ars Technica.
Just days before the marketplace’s launch, GameStop fired chief financial officer Mike Recupero and laid off several employees. While the company said at the time it was “right-sizing headcount” after a hiring spree in 2021, it has also confronted a clash about strategy between recent hires, many from e-commerce giant Amazon.com Inc., and GameStop staffers with a background in brick-and-mortar game sales, Bloomberg has reported. Skills associated with online sales don’t translate to negotiating retail leases and operating stores.
Part of the wave of new hires two years ago included CEO Matt Furlong and the now-departed CFO, who both came from Amazon with expertise in e-commerce. GameStop’s chairman, Ryan Cohen, founded pet e-commerce site Chewy Inc.
With Cohen, “you have a guy who has a lot of success in selling merchandise to people who make recurring purchases, like dog owners,” said Wedbush Securities analyst Michael Pachter. “He’s trying to apply that model to a consumer who does not make recurring purchases. And he’s competing with console manufacturers who deliver games electronically and consumers who prefer to download games electronically as well.”
At its stores, GameStop’s pivot to focus on toys and collectibles seems to be paying off with sales reaching $223.2 million for the quarter, up from $177.2 million the same quarter last year.
Cohen, also an activist investor through his RC Ventures, recently faced criticism after exiting his position in another meme stock, Bed, Bath & Beyond Inc. for a $68.1 million profit mid-August. Retail investors who had flocked to him during meme-stock mania felt burned by his departure and racked up millions in losses. GameStop’s stock plunged in the aftermath.
During the pandemic, GameStop became emblematic of the so-called meme-stock craze whereby retail traders bid up the price of certain companies, prompted by chatter on Reddit, Discord and other social media, rather than business fundamentals. Its stock has been volatile ever since. The shares are down 35% this year.