(Bloomberg) -- GameStop Corp. plunged as much as 22%, the most since September 2019, after the video-game retailer missed third-quarter sales estimates and announced plans to sell up to $100 million in stock.
Sales fell 30% to $1 billion in the period ended Oct. 31, GameStop said on Tuesday. Analysts had predicted $1.09 billion. The stock sale, a so-called at-the-market offering, will be underwritten by Jefferies Financial Group Inc.
The money will be used to fund new-product efforts and build the company’s e-commerce presence, GameStop said in a prospectus. As part of its comeback efforts, the company will continue to shutter brick-and-mortar stores next year and add more products.
The latest results underscored that a turnaround remains elusive for the company, even if new video-game consoles are poised to lift its fortunes in the current quarter. GameStop shares fell as low as $13.22 in New York trading Wednesday.
The company, in part, blamed continued weakness in the performance of its physical stores for lagging industry growth. GameStop has shuttered almost 700 stores this year, and will close more locations in 2021 and 2022, executives said on a call with investors. The executive team is relying on cost cutting and expansion into PC gaming to drive its turnaround. Management will provide a strategy update in January.
The rout put a damper on investor excitement over fresh video-game hardware from Microsoft Corp. and Sony Corp., which are kicking off a new buying cycle. The company said it’s seeing “unprecedented demand” for the consoles, which hit the market after the previous quarter ended. The demand drove comparable-store sales up 16.5% in November.
Christmas Forecast
GameStop isn’t providing specific guidance, but expects positive year-over-year sales growth in the fourth quarter -- and to be profitable.
Cost-cutting efforts, meanwhile, helped contain the retailer’s red ink last quarter. It reported a loss of 53 cents a share, excluding some items, compared with an average estimate of 85 cents.
Activist investor Ryan Cohen, the entrepreneur who helped build up the Chewy pet-supply site, has been pushing the company to undertake a strategic review of operations to further cut costs. He also wants GameStop to increase the variety of products and services it offers online.
It’s been an investor favorite with shares gaining 129% this year, fueled by hopes for the new consoles. But Cohen said last month that GameStop needs to better embrace “the digital economy” if it wants to truly turn around the business.
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