GameStop reported on Monday that it expects preliminary net sales for the second quarter to be in a range of $780 million to $800 million, a decline from $972.2 million in the year-ago period. The videogame retailer attributed the anticipated drop to planned store closures and the sale of its operations in France.
On a profitability basis, the company told investors it anticipates quarterly net income between $290 million and $310 million, compared with $168.6 million reported in the same quarter last year. That projected net income includes approximately $238 million in net gains associated with GameStop's eBay derivative asset and equity investment. Those gains are partly offset by an estimated loss of about $75 million tied to digital assets and related receivables.
GameStop also provided an updated view of its liquidity position, saying it expects cash, cash equivalents and marketable securities to total between $5.05 billion and $5.07 billion at the end of the quarter. That expected balance compares with $8.69 billion at the close of the prior year's second quarter.
Shares of the company fell roughly 2% in premarket trading following the preliminary financials.
The company has been engaged in a widely noted pursuit of a takeover of eBay, building a stake in the online auction company of nearly 10% despite experiencing a rejection in May. Recent reporting cited that GameStop could abandon its acquisition bid and instead pursue a partnership or venture with eBay. The takeover effort drew strong attention from investors but also skepticism from analysts, who questioned how the company would fund an acquisition of that scale and noted limited overlap between the core businesses of the two companies.
GameStop has been shifting its merchandise mix away from traditional hardware sales toward trading cards and collectibles, a change referenced by the company as it prepares its second-quarter results. The retailer is scheduled to release full second-quarter financial results on September 8.
Summary
GameStop expects lower second-quarter net sales in the low-to-mid $800 million range as a result of planned store closures and the divestiture of its France operations, while forecasting higher quarterly net income driven largely by eBay-related investment gains. The company also projects a materially smaller cash and marketable securities position compared with the same quarter last year.
Key points
- Preliminary Q2 net sales are expected to be $780 million to $800 million, down from $972.2 million a year earlier - impacting the retail and consumer discretionary sectors.
- Projected quarterly net income of $290 million to $310 million includes about $238 million of net gains tied to GameStop's eBay derivative asset and equity investment - relevant to capital markets and M&A activity.
- Cash, cash equivalents and marketable securities are expected to fall to $5.05 billion to $5.07 billion from $8.69 billion a year earlier - a notable change for the company's liquidity profile.
Risks and uncertainties
- Lower sales driven by planned store closures and the sale of France operations may further pressure the retail revenue mix and same-store sales metrics in the near term.
- Uncertainty around the proposed eBay takeover - including questions about financing and strategic fit - creates execution risk for any potential transaction or partnership, affecting M&A and investor sentiment.
- The company's quarterly results are influenced by non-operational items, including sizable eBay-related gains and losses on digital assets and receivables, which could introduce volatility to reported earnings and market reactions.
What to watch next
Investors and market participants will be watching GameStop's full second-quarter earnings report due September 8 for detail on the sales decline, the final impact of store closures and the France divestiture, as well as disclosures around the eBay stake, related derivatives and digital asset exposures.