GameStop may be a bitcoin play, but its stock is sliding on weaker-than-expected first-quarter revenue

By James RogersVideogame retailer's shares fall more than 4% WednesdayGameStop Corp. shares are down more than 4% Wednesday after the videogame retailer's first-quarter revenue missed Wall Street's expectations, despite a fourth consecutive quarterly profit.The company (GME), which announced its first purchase of bitcoin (BTCUSD) last month, reported results after market close Tuesday.Related: GameStop makes its first bitcoin buy. Here's why the stock is pulling back.GameStop posted sales of $732.4 million for the quarter ending May 3, down from $881.8 million in the same period last year. The average estimate of two analysts surveyed by FactSet was for revenue of $750 million.However, GameStop is in the throes of a store portfolio optimization review, identifying stores for closure based on factors such as market conditions and underperformance. In a filing that accompanied the results, GameStop said that the review resulted in the closure of 590 U.S. stores during the prior fiscal year and that it anticipates closing a significant number of additional stores during this fiscal year.In a note released Wednesday, Wedbush analyst Michael Pachter said that while GameStop's first-quarter revenue missed expectations, profit came in better than expected, driven by collectibles, used hardware and interest on cash. "Revenue continues to fall dramatically year-over-year as GameStop closes stores and more games are sold digitally," he wrote. However, GameStop's gross profit was $253 million, above Wedbush's estimate of $221 million.The company's first-quarter hardware and accessories revenue was $345.3 million, down from $505.3 million in the same period last year. Software revenue declined to $175.6 million from $239.7 million, while collectibles revenue rose to $211.5 million from $136.8 million. Last year, GameStop announced a collaboration with Collectors Holdings Inc.'s professional sports authenticator division, which offers trading-card and autograph authentication and grading services.GameStop earned $44.8 million, or 9 cents a share, in the quarter, improving on a net loss of $32.3 million, or 11 cents a share, in the prior year's quarter and marking the company's fourth consecutive quarterly profit.On an adjusted basis, GameStop earned 17 cents a share, beating the FactSet consensus estimate of 8 cents a share, also based on projections from two analysts.GameStop's operating loss was $10.8 million, which includes $35.5 million in impairment charges related to international restructuring efforts. The company's operating loss was $50.6 million in the prior year's quarter. Excluding the impairment charges and other items, adjusted operating income was $27.5 million, compared with an adjusted operating loss of $55 million in the prior year's first quarter.Excluding the impairment charges, adjusted net income was $83.1 million, after an adjusted net loss of $36.7 million in the prior year's quarter.GameStop divested its Canadian business on May 4. In its filing, the company said that it is continuing to evaluate its international assets and operations.The videogame retailer ended the quarter with cash, cash equivalents and marketable securities of $6.4 billion, up from $1 billion at the end of the same period last year.Related: Why GameStop is trying to be the next MicroStrategy with its bitcoin moveEarlier this year, GameStop's board unanimously approved an update to its investment policy to add bitcoin as a treasury-reserve asset - following in the footsteps of software company and bitcoin play MicroStrategy Inc. (MSTR), now doing business as Strategy.GameStop's purchase of 4,710 bitcoin tokens occurred between May 3 and June 10, the company said in a statement.Wedbush's Pachter notes that, while GameStop's initial bitcoin investment has increased in value by over $8 million since late May, typical volatility in bitcoin suggests that the company's cash equivalents will be similarly volatile in the future. Wedbush has an underperform rating for GameStop.Like movie-theater chain AMC Entertainment Holdings Inc. (AMC), GameStop saw its shares skyrocket during the 2021 meme-stock frenzy. However, the retailer has wrestled with declining sales in recent years, as well as intense competition from digital gaming and streaming.Related: Meme stocks were fueled by Roaring Kitty and 'Trump trades' this year. What can we expect in 2025?GameStop did not hold a conference call in conjunction with its earnings report.The company's stock is down 8.2% in 2025, compared with the S&P 500 index's SPX gain of 2.7%.-James RogersThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.