(Bloomberg) — GameStop Corp., a struggling video-game retailer championed by Reddit-based investors, fell in extended trading after reporting a second-quarter loss that was wider than Wall Street projections.
The chain, which appointed an Amazon executive as chief executive officer in June, posted a loss of 76 cents a share, excluding some items, according to a statement Wednesday. That was larger than the 67-cent loss analysts had expected. Sales rose to $1.18 billion, beating the $1.12 billion average of analysts’ estimates.
The larger-than-expected loss for the period ended July 31 was driven by higher-than-projected overhead, according to Michael Pachter, an analyst at Wedbush Securities. The company plans a call with investors later Wednesday. As many as 18,000 people were on YouTube waiting for the conference call to begin.
GameStop shares fell as much as 3.9% to $191 in extended trading after the results were announced. The stock was little changed at the close in New York and has risen more than 10-fold this year.
“This stock is 90% psychology/momentum and 10% fundamentals, so in many ways it doesn’t matter what the quarterly results are,” Vital Knowledge’s Adam Crisafulli said in a note. Retail traders on Reddit have been supporting the shares since last year, even though many Wall Street analysts believe the company is highly overvalued.
Investors have been waiting to hear more about CEO Matt Furlong’s strategy to turn around the struggling chain, which plans to become more of an online merchant marketing a wide swath of products beyond just video games and accessories. Activist investor Ryan Cohen, the retailer’s chairman and a major stockholder, has been steering a new course for the chain.
“It’s a chance for them to start to put their mark on the company, give a sense for how they think about the business,” Doug Clinton, managing partner at Loup Ventures, said before the announcement.
GameStop didn’t address a Securities and Exchange Commission investigation disclosed last quarter, when the company said it received a request from the agency’s staff for “voluntary production of documents and information concerning” trading in the stock and shares of other companies. The Grapevine, Texas-based retailer said at the time it didn’t expect any adverse fallout from the probe.
In late June, GameStop sold 5 million shares of common stock, raising about $1.13 billion before commissions and related expenses. GameStop, which has paid off all of its long-term debt, is using the proceeds for general corporate purposes and to finance growth.
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