Wednesday September 27, 2023
GameStop Releases Earnings
GameStop Corp. (GME) announced its second quarter earnings on Wednesday, September 7. The video game, consumer electronics and gaming merchandise retailer's shares rose 10% following the report's release.
GameStop reported quarterly net sales of $1.14 billion. This was down from $1.18 billion reported at this time last year.
"We're going to retain a strong focus on cost containment and continue promoting an ownership mentality across the organization," said GameStop's CEO, Matt Furlong, on its earnings call. "On the product front, our enhanced tech capabilities allowed us to follow the launch of our digital wallet with the launch of our new marketplace that allows gamers, creators, collectors and others to buy, sell and trade NFTs. The launch of our NFT marketplace supports GameStop's pursuit of long-term growth in the cryptocurrency, NFT and Web3 gaming verticals, all of which we expect to be increasingly relevant for the collectors and gamers of the future."
GameStop reported a net loss of $108.7 million or $0.36 per adjusted share. This is greater than a net loss of $61.6 million or $0.26 per adjusted share the previous year.
For the second quarter, the company's collectibles sales accounted for $223.2 million. The company's hardware and accessories segment brought in $596.4 million. Gamestop's selling, general and administrative expenses declined 14.3% to $387.5 million from the prior quarter. Following the launch of the company's digital wallet, GameStop launched its non-fungible token (NFT) marketplace to enable gamers, creators, collectors and others to buy, sell and trade NFTs. The company also announced in a separate press release a partnership with FTX US, designed to introduce more GameStop customers to FTX's community and its marketplace for digital assets.
GameStop Corp. (GME) shares ended the week at $28.92, up 12.3% for the week.
Dave and Buster's Releases Earnings
Dave and Buster's Entertainment, Inc. (PLAY) announced its second quarter earnings report on Wednesday, September 7. The arcade company stock fell 2% following the release of the report.
Revenue reached $468.4 million for the second quarter, a 24% increase from revenue of $377.6 million reported in the same quarter last year. On a two-year spread, revenue increased 36%.
"We are pleased to report record revenue for the second quarter," said Dave and Buster's Chief Executive Officer, Chris Morris. "We experienced strong guest visitation and spending across both brands this quarter. Our teams continued to deliver high levels of service to our guests, while simultaneously beginning the process of integration into one company."
Dave and Buster's reported quarterly net income of $29.1 million or $0.59 per adjusted share. Last year at this time, the company reported a net income of $52.8 million or $1.07 per adjusted share.
Dave and Buster's comparable store sales increased 9.6% at Dave & Buster's branded stores compared with the same quarter in 2019. Dave & Buster's branded stores walk-in comparable store sales increased 13.0%, partially offsetting a decline of 23.1% in Special Event comparable store sales. The company repurchased 764,988 shares for $25 million as part of its $100 million share buyback program. Dave & Buster's ended its quarter with $591.8 million in liquidity, which includes $100.4 million in cash and leaves $491.4 million on deck in its $500 million revolving credit facility.
Dave and Buster's Entertainment, Inc. (PLAY) shares closed at $38.86, down 8.5% for the week.
American Eagle Outfitters Quarterly Report
American Eagle Outfitter, Inc. (AEO) released its second quarter earnings on Wednesday, September 7. The Pittsburgh based lifestyle, clothing and accessories retailer reported a minimal increase in revenue, but saw its stocks fall 12% following the release of the report.
Revenue for the second quarter came in at $1.20 billion, remaining flat from revenue of $1.19 billion this time last year.
"In a shifting macro environment, we are focused on controlling the controllables," said American Eagle's Executive Chairman of the Board and CEO, Jay Schottenstein. "We entered the second half with inventory levels in a much better position and an assortment that is current for the Fall season. Given ongoing external uncertainties, we have taken additional actions to improve financial performance. We have made more expansive expense reductions and are pulling back further on capital expenditures."
The company posted net losses of $42.5 million for the quarter, compared to net income of $121.5 million during the same quarter last year. The adjusted loss per share was $0.24, compared to net income of $0.58 per share this time last year.
The company's namesake brand, along with its Aerie brand, saw its total ending cost inventory increase 36% to $687 million compared to $504 million last year, with both brands equally contributing to the increase. Supply chain improvements contributed to an increase of 22% in total units, reflecting better in-stocks and earlier receipts. The company's stock buybacks in the quarter reached $265 million, the highest the company has seen since 2015. To increase financial flexibility, the company will be pausing its quarterly cash dividend.
American Eagle Outfitter, Inc. (AEO) shares closed at $10.69, down 5.7% for the week
The Dow started the week of 9/6 at 31,344 and closed at 32,152 on 9/9. The S&P 500 started the week at 3,931and closed at 4,067. The NASDAQ started the week at 11,643 and closed at 12,112.
Treasury Yields Increase
U.S. Treasury yields held steady on Friday, as investors digested monetary policy changes. Earlier in the week, yields were impacted by the European Central Bank's interest rate increase and rising continuing unemployment claims.
On Thursday, the European Central Bank increased its interest rate to 0.75% from zero in an effort to counter rapid inflation. As a result, the yield on the benchmark 10-year Treasury note was up almost 5 basis points at 3.31%, while the yield on the 30-year Treasury bond was up 6 basis points at 3.46%.
"We acknowledge and we agree that we must reduce inflation," said the chairman of euro zone finance ministers, Paschal Donohoe. "The failure to do so will make our citizens, the people of Europe, poorer for longer."
On Thursday, the U.S. Department of Labor reported that initial claims for unemployment decreased 6,000 to 222,000 for the week ending September 3, coming in below the 240,000 economists' expected. Continuing unemployment claims increased by 36,000 to 1.47 million, reaching the highest level in five months.
"We don't expect initial claims to continue to fall, but don't look for a sharp spike either," said lead U.S. economist at Oxford Economics, Nancy Vanden Houten. "Even as the economy is weighed down by higher interest rates, labor markets are only starting to loosen slightly. So we think employers will be reluctant to let go of workers, and will slow hiring first."
The 10-year Treasury note yield finished the week of 9/9 at 3.31%, while the 30-year Treasury note yield finished the week at 3.45%.
Mortgage Rates Continue to Increase
Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, September 8. Mortgage rates continued to rise for the week.
This week, the 30-year fixed rate mortgage averaged 5.89%, up from last week's average of 5.66%. Last year at this time, the 30-year fixed rate mortgage averaged 2.88%.
The 15-year fixed rate mortgage averaged 5.16% this week, up from 4.98% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.19%.
"Mortgage rates rose again as markets continue to manage the prospect of more aggressive monetary policy due to elevated inflation," said Freddie Mac's Chief Economist, Sam Khater. "Not only are mortgage rates rising but the dispersion of rates has increased, suggesting that borrowers can meaningfully benefit from shopping around for a better rate. Our research indicates that borrowers could save an average of $1,500 over the life of a loan by getting one additional rate quote and an average of about $3,000 if they get five quotes."
Based on published national averages, the savings rate was 0.13% as of 8/15. The one-year CD averaged 0.46%.
Published September 9, 2022
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