What’s happening: The video game retailer reported disappointing earnings after US markets closed on Wednesday. Sales grew, but the company’s quarterly losses widened. It also disclosed that the US Securities and Exchange Commission had issued a subpoena in August for documents relating to an investigation into the trading of its shares.
GameStop’s stock is down 4.5% in premarket trading on Thursday.
See here: GameStop’s shares closed at $173.65 on Wednesday, up 822% from the start of 2021.
But after rising 908% between January and March, the stock gained another 13% in the second quarter. It pulled back 18% in the third quarter and has dropped another 1% since October.
GameStop could still be a bubble. But so far, it hasn’t popped. Not really.
Behind the curtain: GameStop’s earnings reveal that beyond the hype, it’s still facing all the problems of a struggling retail company trying to pivot to e-commerce.
The company has had to spend extra money stocking up on products as supply chain snarls continue to cause headaches. GameStop finished out the quarter with inventory of $1.1 billion, compared to $861 million during the same period a year earlier.
Meanwhile, it’s also investing in bulking up its network for fulfilling orders and setting up a customer care operation in south Florida.
“Our focus on the long term means we will continuously prioritize growth and market leadership over short-term margins,” said CEO Matthew Furlong, who took the company’s top job earlier this year. He previously worked at Amazon.
Investors are buying into that vision — or at least buying into the idea that others will stay on board and maintain their holdings.
Watch this space: Institutional investors own an estimated 46% of GameStop’s shares, according to data from Refinitiv. The remainder is owned by everyday investors. Both have a stake in how this ultimately plays out.
The moment has come: Evergrande defaults on its debt
Breaking news: The embattled property developer has defaulted on its debt, according to Fitch Ratings.
The credit ratings agency on Thursday downgraded the company and its subsidiaries to “restricted default,” meaning that the firm has failed to meet its financial obligations, my CNN Business colleague Laura He reports.
Fitch said the downgrade reflects the company’s inability to pay interest due earlier this week on two dollar-denominated bonds. The payments were due a month ago, and grace periods lapsed Monday.
Fitch noted that Evergrande made no announcement about the payments, nor did it respond to inquiries from the ratings agency. “We are therefore assuming they were not paid,” Fitch said.
Evergrande has about $300 billion in total liabilities, and analysts have worried for some time about whether a default could trigger a wider crisis in China’s property market, hurting homeowners and the broader financial system. The US Federal Reserve warned last month that trouble in Chinese real estate sector could damage the global economy.
Another credit ratings agency, S&P, said earlier this week that “default looks inevitable for Evergrande” with repayments of $3.5 billion on US-dollar denominated bonds due in the coming months.
Investor insight: Evergrande’s shares had already plummeted in anticipation of the news. They’re down 88% in 2021 and trading near a record low.
For now, though, anxiety about Evergrande remains contained.
The return to the office gets postponed again
Bosses are desperate to get their employees back into the office. That doesn’t look like it’s going to happen any time soon.
The ride sharing company said Wednesday that it won’t require its staff to return to the office until 2023. Lyft did not cite concerns about the Omicron coronavirus variant in its statement, instead pointing to the “flexibility” desired by its employees.
In November, the number of American employees who were still working remotely because of the pandemic was just above 11%, according to data from the Bureau of Labor Statistics.
Also today: Initial US jobless claims for last week post at 8:30 a.m. ET.
Coming tomorrow: The latest look at consumer price inflation in the United States, which hit its highest level in three decades in October.