GameStop Recovery Hinges on US Strength as Global Woes Continue

GameStop Corp. GME delivered mixed regional results in the first quarter of fiscal 2025, as strength in the United States was overshadowed by continued weakness in international markets. Total net sales fell 16.9% year over year to $732.4 million from $881.8 million, reflecting the company’s ongoing restructuring efforts and challenges abroad.

The U.S. business remained the company’s cornerstone, posting net sales of $537.5 million, down 12.9% from the prior year. Despite lower sales, cost reductions and improved efficiency drove a turnaround to $33.6 million in operating income from a $25.3-million loss a year earlier. This marked improvement highlights the domestic market’s importance, with the United States now accounting for 73.4% of total sales.

International operations, however, continued to drag the overall performance. In Canada, net sales declined 10.3% year over year to $38.2 million, and the operating loss deepened to $22.2 million due to $18.3 million in impairment charges tied to the company’s exit from the market, which was completed after the quarter ended.

Europe faced even greater pressure, with sales plunging 47.4% to $74.8 million and losses widening to $16.8 million, weighed down by $17.2 million in impairment costs and falling demand. Australia showed modest improvement, as sales rose 2.9% to $81.9 million while operating losses narrowed slightly to $5.4 million.

These results underscore the urgent need for GameStop to focus on profitable markets and exit or restructure underperforming ones. The U.S. turnaround offers a foundation, but remaining international losses highlight the importance of decisive action to sustain its recovery and adapt to changing market dynamics.

GME’s Price Performance, Valuation & Estimates

Shares of GameStop have lost 10.8% in the past three months against the industry’s growth of 30.7%. 

GME has underperformed its competitors, including Best Buy Co., Inc. BBY and Microsoft Corporation MSFT. Shares of Best Buy have declined 4.3%, while Microsoft shares have risen 36.2% over the same period.

From a valuation standpoint, GME trades at a forward price-to-sales ratio of 3.30X, slightly below the industry’s average of 3.74X. It has a Value Score of D. GameStop is trading at a premium to Best Buy (with a forward 12-month P/S ratio of 0.34X) and at a discount to Microsoft (11.99X).

The Zacks Consensus Estimate for GameStop’s fiscal 2025 earnings implies a year-over-year upsurge of 127.3% and the same for fiscal 2026 indicates a decline of 52%. Estimates for fiscal 2025 and 2026 have been upbound 28 cents and southbound 11 cents, respectively, in the past 60 days.

GME currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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