GameStop Corp. (NYSE:GME)

Over the analyzed periods, the net operating profit after taxes (NOPAT) exhibits a pattern of significant fluctuations with an overall trend toward reduced negative values. In the earliest period, NOPAT was deeply negative at approximately -781 million US dollars, improving substantially by the following year to about -355 million US dollars. This positive movement continues in 2021, where the negative value sharply decreases to around -85 million US dollars. However, the subsequent years show volatility, with an uptick in negative NOPAT to about -334 million US dollars in 2022, improvement again to roughly -229 million in 2023, followed by a slight deterioration to nearly -86 million in 2024. Despite these fluctuations, the company consistently reports negative NOPAT across all periods.

The cost of capital declines steadily from 4.27% in 2019 to a low of 3.25% in 2022, before a slow increase to 3.41% by 2024. This contraction suggests a reduction in the company’s weighted average cost of capital, potentially reflecting lower perceived risk or favorable financing conditions over most of the review period.

Invested capital shows a fluctuating trend with a general decline over the years. Starting at approximately 3 billion US dollars in 2019, invested capital drops to just under 1.7 billion by 2021. A notable rebound occurs in 2022, climbing back to about 2.44 billion US dollars, but this is not sustained as the figure declines again in the following years, ending around 1.86 billion US dollars in 2024. These movements indicate variability in capital deployment, possibly reflecting strategic decisions regarding asset base management or operational scale.

The economic profit remains negative throughout the observed timeframe, mirroring the trends seen in NOPAT. The initial economic loss is very large at approximately -909 million US dollars in 2019, improves substantially by 2021 to about -141 million US dollars, but worsens again in 2022 to nearly -413 million US dollars. Improvements are seen in 2023 and 2024 with economic losses declining to approximately -293 million and -149 million US dollars respectively. Despite this reduction in negative economic profit, the consistent losses highlight ongoing challenges in value generation over the years.

In summary, the data presents a scenario of continuous financial distress as reflected in persistent negative NOPAT and economic profit, despite some improvements. The reduction in the cost of capital suggests better financing terms, but fluctuating invested capital indicates inconsistent capital management strategies. These patterns warrant a closer examination of operational efficiencies and strategic capital allocation to enhance long-term financial performance.

Net Income (Loss)

The net income (loss) showed a significant improvement over the period analyzed. Initially, the company recorded substantial losses, with the highest loss of -673,000 thousand USD in the fiscal year ending February 2, 2019. Over the subsequent years, the losses decreased considerably, falling to -215,300 thousand USD by January 30, 2021. Despite a temporary increase in losses to -381,300 thousand USD in January 29, 2022, the downward trend continued with losses reducing to -313,100 thousand USD by January 28, 2023. Notably, the fiscal year ending February 3, 2024, marked a pivotal turnaround, with the company achieving a small positive net income of 6,700 thousand USD.

Net Operating Profit After Taxes (NOPAT)

NOPAT also exhibited a trend of decreasing losses throughout the measured periods. The most significant loss of -781,477 thousand USD occurred in February 2, 2019, which subsequently improved to -355,014 thousand USD by February 1, 2020. This improvement paused temporarily in January 29, 2022, when NOPAT declined to -333,718 thousand USD after reaching a low of -85,038 thousand USD on January 30, 2021. The losses for NOPAT decreased again to -228,718 thousand USD in January 28, 2023, followed by a slight decline to -85,929 thousand USD in the most recent period ending February 3, 2024.

Overall Trends and Insights

The financial performance over the six-year span indicates a movement from deep operating and net losses toward stabilization and eventual profitability. Both net income and NOPAT figures show a marked reduction in losses, reflecting possible operational restructuring or improved market conditions. The positive net income in the most recent year suggests that the company may have effectively addressed key challenges impacting profitability. However, NOPAT remains negative, indicating ongoing operating inefficiencies or costs yet to be fully mitigated. Continued monitoring of these figures would be crucial to assess whether the trend toward profitability is sustainable.

Income tax expense (benefit)

The income tax expense experienced significant fluctuations over the examined years. Beginning with a positive tax expense of 41,700 thousand USD in early 2019, it decreased slightly to 37,600 thousand USD by early 2020. Notably, the company reported a tax benefit in 2021 and 2022, with negative values of -55,300 thousand USD and -14,100 thousand USD, respectively. This indicates that rather than paying taxes, the company recognized tax benefits or refunds during these two years. From 2023 onward, the tax expense reverted to positive figures, with 11,000 thousand USD in 2023 and a further decrease to 6,400 thousand USD in early 2024. Overall, the data points reveal a transition from tax liabilities to tax benefits and back to reduced tax expenses, reflecting potentially changing profitability, tax strategies, or accounting adjustments.

Cash operating taxes

Cash operating taxes show a highly volatile and irregular trend throughout the period. In 2019, cash operating taxes were substantially positive at 117,519 thousand USD. However, this shifted dramatically in 2020 and 2021 to large negative amounts of -11,569 thousand USD and -123,389 thousand USD, respectively, possibly indicating tax refunds or credits received in these years. The trend reversed again in 2022, with a positive cash tax outflow of 13,307 thousand USD, which slightly increased to 18,513 thousand USD in 2023, before dropping significantly to 3,462 thousand USD in early 2024. This volatility suggests considerable fluctuations in tax cash payments, perhaps influenced by changes in taxable income, tax planning, or timing differences in tax settlements.

Total Reported Debt & Leases

The total reported debt and leases demonstrate a clear downward trend over the reported periods. Beginning at approximately 1.62 billion US dollars in early 2019, the debt significantly decreases to around 1.19 billion by early 2020, continuing to decline in subsequent years, reaching approximately 603 million by early 2024. This consistent reduction indicates a strategic effort to deleverage or reduce liabilities.

Stockholders’ Equity

The stockholders’ equity shows a volatile pattern with initial declines followed by a strong recovery. Equity dropped sharply from about 1.34 billion in 2019 to 612 million in 2020, and further down to 437 million in 2021, reflecting potential losses or other negative impacts. However, a notable turnaround occurs in 2022, with equity rising dramatically to 1.6 billion and slightly decreasing to around 1.34 billion near 2024. This recovery may be indicative of improved profitability or capital restructuring efforts.

Invested Capital

Invested capital closely follows the trends observed in debt and equity, exhibiting a general decline from 3.0 billion in early 2019 to about 1.66 billion in early 2021. A significant rebound is evident in 2022, with invested capital climbing back to roughly 2.44 billion, before declining once again to approximately 1.86 billion by early 2024. This fluctuation suggests shifts in capital deployment and possibly changes in operational scale or investment strategy during these years.

The financial data over the six-year period reveals several important trends related to economic profit, invested capital, and economic spread ratio.

Economic Profit

The economic profit consistently remained negative throughout the period, indicating the company operated at a loss in terms of economic profit. The magnitude of the loss decreased significantly from -909,305 thousand US dollars in 2019 to a low point of -140,891 thousand US dollars in 2021. However, following this improvement, economic profit worsened again in 2022 and 2023, reaching -412,984 and -293,235 thousand US dollars respectively, before improving slightly in 2024 to -149,199 thousand US dollars. This pattern suggests fluctuations in economic profit with a notable recovery attempt in 2021 and 2024 but without achieving positive economic profit.

Invested Capital

The invested capital showed a general declining trend over the years, decreasing from 2,995,218 thousand US dollars in 2019 to 1,857,700 thousand US dollars in 2024. Notably, there was an initial sharp decline until 2021, followed by a rebound in 2022 where invested capital increased to 2,440,500 thousand US dollars, before declining again in subsequent years. This variance suggests adjustments in the company's capital investment strategy, possibly as a response to operational performance or market conditions.

Economic Spread Ratio

The economic spread ratio, which measures the spread of returns over the cost of capital, was negative throughout the period, ranging from -30.36% in 2019 to -8.03% in 2024, indicating returns were consistently below the cost of capital. This ratio improved markedly from 2019 to 2021, reducing the negative spread from -30.36% to -8.51%. It deteriorated somewhat in 2022 and 2023 before improving again in 2024. This trend aligns with the economic profit pattern, reflecting challenges in generating value over the invested capital cost but also some periods of recovery.

Overall, the data reflect a company experiencing ongoing challenges in achieving positive economic profit and economic spread ratios, despite efforts to manage invested capital. The intermittent improvements in 2021 and 2024 indicate some recovery but without reaching positive economic returns.

Adjusted Net Sales

Adjusted net sales demonstrated a declining trend over the analyzed period, decreasing from $8,277,100 thousand in February 2019 to $5,189,500 thousand in February 2024. This represents a significant reduction in revenue, with notable drops particularly evident between 2019 and 2021, followed by a slight recovery in 2022 and 2023, before declining again in 2024.

Economic Profit

Economic profit remained negative throughout the period, indicating that the company did not generate value above its cost of capital in any year. There was an initial improvement from -$909,305 thousand in 2019 to a lower loss of -$140,891 thousand in 2021, suggesting some operational efficiencies or cost control measures. However, economic profit deteriorated again in 2022 and 2023, before improving in 2024 to -$149,199 thousand, albeit still negative.

Economic Profit Margin

The economic profit margin aligned with the economic profit figures, consistently showing negative values each year. Starting at -10.99% in 2019, it improved progressively to -2.77% in 2021, indicating a narrowing gap between profitability and cost of capital. Nevertheless, margins worsened in the subsequent years 2022 and 2023 before improving to -2.88% in 2024. While this indicates some fluctuation, the margin has not reached a positive state.

Overall Insights

The data reflects ongoing challenges in sustaining revenue growth and achieving positive economic profit. Although there were periods of relative improvement, particularly around 2021, the company has yet to translate these into a sustained positive economic profit margin. The decline in adjusted net sales combined with continued negative economic profit margins suggests persistent profitability pressures and the need for strategic focus on enhancing operational efficiency or revenue diversification.