GameStop reports decline in sales and submits offer for 20 million shares

(Reuters) – GameStop said on Tuesday it had filed an offering for up to 20 million shares, sending the company's shares down more than 10% in extended trading after the video game retailer's second-quarter sales fell as consumers continued to shift to online purchases.

The company, which is at the center of a trading frenzy for “meme stocks,” has been struggling with declining revenue in its core business of selling new and used video game discs due to a shift toward digital downloads, game streaming and e-commerce shopping.

GameStop said the company intends to use the proceeds from the offering “for general corporate purposes, which may include acquisitions and investments consistent with our investment policies.”

The company is also looking for stores to close and expects to close more stores than in recent years, it said Tuesday, consistent with comments made by CEO Ryan Cohen in June.

Cohen warned earlier this year of intense competition in the games console market.

Wedbush analysts said Friday that GameStop continues to face nearly insurmountable obstacles to its planned return to growth due to the increasing prevalence of streaming services, while the company lacks any strategy to enter new categories with growth potential.

GameStop shares have been subject to significant fluctuations this year after online stock influencer Roaring Kitty returned to X.com after a three-year hiatus with a cryptic meme that was widely seen as a positive signal for GameStop.

Roaring Kitty was a key player in the 2021 rally of GameStop and other so-called meme stocks, fueled by individual investors on Reddit's WallStreetBets forum.

GameStop reported revenue of $798.3 million for the quarter ended August 3, compared to $1.16 billion a year earlier. Two analysts surveyed by LSEG had expected revenue of $895.7 million.

Net income was $14.8 million, or 4 cents per share, compared to a loss of $2.8 million, or 1 cent per share, a year earlier. This was helped by a 16% decrease in the company's selling and administrative expenses during the quarter.

(Reporting by Harshita Mary Varghese in Bengaluru; Editing by Shinjini Ganguli)