Dwight Burdette

GameStop’s “challenging” fiscal year ended with a net loss of nearly $270 million

GameStop’s “challenging” fiscal year ended with a net loss of nearly $270 million

GameStop CEO Paul Raines announced a $269.7 million net loss for the games retailer's 2012 fiscal year, which ended February 2, 2013. This news might seem dire, considering the company posted net earnings of $339.9 million in fiscal 2011.

A shift of over $600 million that puts the company in the red? Yeah, that's usually bad.

The strange thing is, the company didn't actually make a whole lot less money than during its 2011 fiscal year. GameStop reported earnings of $405.1 million in 2011, and $403 million in 2012. The company didn't lose money because people decided en masse that they weren't shopping there, they lost money due to “restructuring, impairment and debt retirement expenses… primarily related to goodwill impairment in the third quarter of 2012.” In other words, GameStop's biggest expense was in reorganizing itself, and recovering from poor image. So why such a huge sink of money into restructuring?

“We invested in our mobile and digital businesses to position the company for future success,” Raines said. “These channels delivered as planned and significantly contributed to our highest ever gross margin and profitability.”

For now however, the company is still supporting the physical console cycle, and Raines anticipates GameStop will make large returns this holiday season due to the upcoming Sony and Microsoft consoles. “Ahead of these events, GameStop expects the first half of the year to be challenging as consumers postpone purchases leading up to the fourth quarter console launch,” Raines said.

The biggest danger to GameStop is the fear that the next Xbox or the PlayStation 4 will somehow limit the use of used games, or impose fees on those who play second-hand games. Both moves could significantly hurt one of the GameStop's highest margin products.

If you want to find out more about the company's financial state, you can read the entire 2012 fiscal year earnings announcement here.