Has GameStop Forged a Cost Path Toward Sustainable Profitability?

GameStop Corp. GME delivered a notable improvement in its fiscal first-quarter 2025 results, driven largely by disciplined cost management and improved operational efficiency. The company slashed adjusted SG&A expenses by 24.8% year over year, bringing the metric down to $225.3 million. As a percentage of net sales, adjusted SG&A improved 320 basis points to 30.8%. This underscores management’s efforts to streamline operations and enhance efficiency without undermining core business functions.

The company’s cost discipline supported a 3.4% rise in gross profit, which increased to $252.8 million from $244.5 million. Gross margin expanded significantly by 680 basis points to 34.5%, highlighting improved pricing and cost control. Despite declining revenues, GameStop managed to protect its product-level profitability.

Operationally, GameStop saw strong gains. Adjusted EBITDA turned positive at $38.6 million, reversing a loss of $37.6 million in the prior year. Adjusted operating income also improved significantly, reaching $27.5 million in contrast to a loss of $55 million in the last year. 

GameStop’s bottom-line performance further highlighted the benefits of its cost restructuring. The company shifted from a net loss of $32.3 million to a net income of $44.8 million in the first quarter of fiscal 2025. Adjusted net income improved to $83.1 million from a loss of $36.7 million, with adjusted earnings per share rising to 17 cents from an adjusted loss of 12 cents in the prior-year quarter. 

However, net sales declined 17% year over year, due to weakness in hardware and software. Growth in the collectibles segment offered some offset, but long-term success will depend on stabilizing core revenues and scaling newer growth areas.

Are BBY & BYD Showing Similar Financial Discipline?

Best Buy Company Inc.’s BBY disciplined cost management in the first quarter of fiscal 2025 led to a 0.9% year-over-year reduction in adjusted SG&A expenses, totaling $1,716 million. Adjusted SG&A as a percentage of revenues are expected to be slightly lower for the full year, supported by Best Buy’s ongoing efficiency efforts. Best Buy remains focused on driving productivity gains and operational improvements.

Boyd Gaming Corporation’s BYD disciplined cost management in first-quarter fiscal 2025 led to a slight decline in SG&A expenses to $107.8 million from $108.2 million a year ago. Strong 40% property operating margins highlight Boyd Gaming’s ability to execute efficiently despite external headwinds. Boyd Gaming continues prioritizing cost control and operational discipline to sustain profitability.

GME’s Price Performance, Valuation & Estimates

Shares of GameStop have lost 23.6% year to date against the industry’s growth of 13.7%. 

From a valuation standpoint, GME trades at a forward price-to-sales ratio of 3.23X, slightly below the industry’s average of 3.58X. It has a Value Score of C.

The Zacks Consensus Estimate for GME’s fiscal 2025 earnings implies year-over-year growth of 127.3%, whereas 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 30 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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