Published - November 8, 2022 @ 2:17 PM (EET)

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On Wednesday, meme stock GameStop (NYSE:GME) reported its steepest quarterly drop in revenue, missing Wall Street projections as the gaming retailer continues efforts to boost digital purchases and turn its business around.

In the fiscal third quarter, the retailer's total sales were down from $1.3 billion over the same period last year to roughly $1.2 billion.  In addition, cash and cash equivalents declined from approximately $1.4 billion last year to a staggering $804 million.

GameStop, which is in the middle of a transformation that includes a reduction in jobs and a leap into the cryptocurrency world and non-fungible tokens (NFTs), has yet to see a meaningful impact on its initiatives.

Chairman Ryan Cohan, who joined the company a year ago, is working to revitalize growth at the Texas-based company, which has seen its gamers move from traditional game discs to digital downloads.  

Covid lockdowns have also exacerbated an economic slowdown, while supply chain constraints further hampered its retail business on consoles.

After declining 4.8% during the regular session Wednesday, shares climbed nearly 3% in after-hours trading.

Though there aren't many analysts covering the stock, WedBush analysts, in a recent note, said,

"GameStop's transformation efforts have missed the mark so far, leaving it to rely on a challenged core business."

QUARTERLY REPORT

Software sales declined 19% to $352.1 million in the quarter, while hardware and accessories sales dropped 6.4% to $627 million.

More positively, Collectibles gained 7.9% to $207.3 million.

While GameStop did not mention job cuts during the earnings report, Axios reported that the gaming retailer had started another round of employee reductions earlier this week with a structured approach to build the company's blockchain wallet.

Earlier this year, the company revealed it was narrowing its headcount and dismissed Chief Financial Officer Mike Recupero.

NOW WHAT

Rather than focusing on business fundamentals, GameStop became the poster child for meme stocks during the pandemic when retail traders bid up the price of some companies, often prompted by chatter on Reddit and other social groups.

Since then, the stock, which has a market value of $7 billion, has been notoriously volatile.