GameStop Opens Lower Following Mixed Financials

The day after world’s largest video game retailer GameStop posted mixed second-quarter (ended July 30) financial results, company shares trended down during early Sept. 9 trading.

Despite a retail footprint of thousands of stores, GameStop rebooted its senior management team, incorporating a team of e-commerce experts led by new chairman Ryan Cohen, founder of Chewy.com. The company is in the process of transitioning from physical retail to technology and online gaming.

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Cohen & Co.’s ascendancy has been fueled in part by crowdsourced-investors looking to manipulate GameStop shares for short-term gains. The strategy has worked thus far, with shares up 860% year-to-date based largely on non-business fundamentals. Quarterly revenue topped $1.18 billion, above an industry estimate of $1.12 billion.

Regardless, GameStop management conducted no Q&A during its Sept. 8 fiscal call — the second consecutive fiscal period it has done so.

As a result, much of the established Wall Street investment community has abandoned GameStop, except Wedbush Securities game expert Michael Pachter. The analyst questions when Cohen will live up to his hype.

“I am waiting for his brilliant strategy, and it’s not going to be brilliant,” Pachter told Yahoo Finance. “If it was brilliant, then he would have let us know, months and months and months ago. [Cohen] is trying to revolutionize an industry that has already passed him by. He’s audacious, and he’s wrong on this one.”

GameStop to Rebrand EB Games in Canada

GameStop July 28 announced that it plans to rebrand 4,000 EB Games stores in Canada to GameStop. By the end of this year, EB Games’ Canadian locations and online store will assume the GameStop brand and name.

GameStop acquired Electronic Boutique in 2005 for $1 billion. It remains Canada’s largest video game retailer.

“This decision follows our receipt of feedback from our valued customers and stockholders,” GameStop said in a media statement.

The company, under a new CEO Matt Furlong and chairman Ryan Cohen, will join the S&P MidCap 400 exchange on Aug. 4.

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GameStop Expands Fulfillment With New Facility in Reno, Nevada

GameStop July 6 announced the continued expansion of its North American fulfillment network and entry into a lease of a 530,000 square foot facility in Reno, Nevada, which is expected to be operational in 2022.

The nation’s largest video game retailer’s new presence in Reno will position it to grow in-store and online product offerings and expedite shipping across the west coast. This expansion follows GameStop’s entry into a lease of a 700,000 square foot facility in YorkPenn.

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The facility leases follow the June 21 appointment of new CEO Matt Furlong, a former Amazon executive, hired as part of new chairman Ryan Cohen’s initiative to expand GameStop’s e-commerce initiatives.

GameStop Generates $1.1 Billion at the ‘ATM’

GameStop, the world’s largest standalone video game retailer, continues to defy Wall Street sensibilities despite middling financials.

The Grapevine, Texas-based chain said it generated about $1.1 billion in revenue from “at-the-market” (ATM) sales of 5 million shares of common stock. An ATM offering is a type of stock sale utilized by publicly traded companies in order to raise capital over time.

GameStop, which said it would use the proceeds for “general corporate purposes as well as for investing in growth initiatives and maintaining a strong balance sheet,” initiated the sale on June 9.

Meanwhile, GameStop reported a net loss of $215 million for the fiscal year ended Jan. 31. Revenue declined 22% to $5 billion.

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Since the beginning of the year, the chain has become caught up in a social media frenzy pitting crowdsourcing individual day traders against established Wall Street hedge funds. Under a David vs. Goliath media spotlight, individual traders working together were able to skyrocket GameStop’s stock valuation, resulting in significant fiscal losses for hedge funds that had bet the shares would decline in value.

Abetting the situation was the arrival of Chewy.com founder Ryan Cohen, a populist star among individual traders, who initially bought a lot of shares of GameStop when prices were low, i.e. $4 to $5 per share, and then proceeded to help  jumpstart the stock in valuation.

Soon Cohen was named to the board and then chairman. That meant the arrival of new senior executives, including former Amazon executive Matt Furlong as new CEO, with a push to jumpstart e-commerce revenue. Meanwhile, previous CEO George Sherman is exiting with a golden parachute worth about $100 million thanks to GameStop shares hovering around $214 per share in pre-market trading — compared with about a $3.77 per share low within the past fiscal year.

GameStop Adds New CEO Matt Furlong to Board

GameStop, the world’s largest video game retailer, June 21 announced the appointment of new CEO Matt Furlong to its board of directors, effective immediately. The appointment date aligns with Furlong’s start date as new chief executive officer. Coinciding with Furlong’s appointment, outgoing CEO George Sherman has retired from the board. Five of the six members of the Board remain independent.

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Matt Furlong

Furlong, a former Amazon executive, was hired as part of new chairman Ryan Cohen’s initiative to expand e-commerce initiatives.

Cohen, who launched online pet supply service Chewy.com, is a favorite among independent day traders and investors. His involvement in GameStop contributed to the company’s shares becoming a social media trading meme. Shares opened June 21 above $220 per share, compared with a 52-week low of $3.77 per share. How much of that valuation is actually based on company financials is anyone’s guess.

GameStop Under SEC Scrutiny With Stock Up 1,500% in 2021

GameStop June 10 disclosed it is being investigated by federal regulators from the Securities Exchange Commission — the result of months-long stock volatility that has seen the video game retailer’s shares skyrocket 1,500% in value in 2021.

The retailer said it is reviewing the regulatory request, producing the requested documents and intends to cooperate fully with the SEC.

“This inquiry is not expected to adversely impact us,” GameStop said in a statement.

After raising almost $552 million from the issuance of 3.5 million shares in April, GameStop said it plans to issue another 5 million shares in the near future. The stock, along with AMC Entertainment’s, has become fodder for individual traders fueled by social media and crowdsourced stock moves. Company shares closed June 9 up over $300 a share from little more than $4 per share last July.

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“The trading probe is definitely a big red flag,” David Trainer, CEO of research firm New Constructs, said in a media interview. Trainer characterized the SEC probe as “the needle that can bust the balloon of the stock’s valuation.”

Wedbush Securities media analyst Michael Pachter contends the regulatory investigation is normal in light of the stock jump. But the analyst believes the June 10 morning decline in share price has more to do with the new stock sale.

“We think that the sell-off had little to do with the fundamentals and everything to do with the company’s failure to reveal its strategy,” Pachter wrote in a June 10 note.

Regardless, Texas-based GameStop saw first-quarter sales (ended May 1) increase 25% to $1.27 billion, from revenue of $1 billion in the previous-year period. Net loss narrowed nearly 60% to $66.8 million, from a net loss of $165.7 million a year earlier.

Speaking on his last call as CEO, George Sherman said the increased revenue came despite the closure of 118 under-performing stores. GameStop still operates nearly 4,700 stores worldwide.

Former Amazon executive Matt Furlong becomes GameStop’s new CEO on June 21.

Furlong’s arrival, along with fellow Amazon executive Mike Recupero as new CFO, underlines the fact that GameStop’s the future is online and with ecommerce. The chain is adding 700,000-square feet to a fulfillment facility in York, Pennsylvania.

“This new distribution center, which is expected to be operational by the fourth quarter of this year, will enhance our order fulfillment capabilities on the East Coast,” Sherman said on the June 9 call.

 

GameStop Names Ex-Amazon Executives as New CEO, CFO

Just hours after his appointment as new chairman of the board at GameStop, Ryan Cohen June 9 wasted little time returning to the online universe in selecting a new CEO and CFO.

CEO Matt Furlong

The venerable video game retailer has named Matt Furlong as new CEO and Mike Recupero as new CFO. Furlong and Recupero come from Amazon, where they each held senior roles and oversaw various growth initiatives during their respective tenures. Furlong’s start date is June 21, and Recupero’s start date is July 12.

Furlong replaces CEO George Sherman, who held the position since 2019, but was forced out with the arrival of Cohen, founder of online pet supply company Chewy.com.

Cohen is looking to jumpstart GameStop’s e-commerce initiatives, and Furlong is a veteran e-commerce leader with significant experience implementing growth strategies across global geographies and product categories. Most recently, he was a country leader and oversaw Amazon’s Australia business. He was previously a technical advisor to the head of Amazon’s North America Consumer business. Throughout his nearly nine years at Amazon, he also ran a variety of product categories and oversaw strong market share expansion.

Recupero replaces Jim Bell, who exited the retailer in February. The former is a technology industry finance executive, who spent more than 17 years at Amazon supporting growth across global geographies and product categories. He most recently served as CFO of the North American Consumer business after serving as CFO of Prime Video. He previously served as the CFO of the European Consumer business. He began his career at Amazon, holding analyst, manager and director roles of increasing responsibility.

GameStop Expands E-Commerce Fulfillment Capacity

GameStop May 3 announced the expansion of its North American fulfillment network through its entry into a lease of a 700,000 square foot fulfillment center in York, Penn.

The facility is expected to be operational by the fourth quarter of 2021 and will support e-commerce and fulfillment needs. The nation’s largest video game retailer expects the fulfillment center will position it to grow product offerings and expedite shipping across the East Coast.

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GameStop is in the midst of internal reorganization with the pending arrival of new chairman Ryan Cohen, co-founder of online pet supplies company Chewy.com. CEO George Sherman and other executives are leaving as Cohen staffs the retailer with Chewy executives in an attempt to push online gaming and e-commerce, and away from packaged-media retail.

 

Departing GameStop Executives Eyeing Lottery-Winning Paydays

July 31 can’t come soon enough for several GameStop executives, including CEO George Sherman, who are slated to exit the video game retailer at that time in a management reorganization driven by incoming chairman of the board Ryan Cohen, co-founder/CEO of online pet supply service Chewy.com.

Sherman, CFO James Bell, chief customer officer Frank Hamlin, and chief merchandising officer Chris Homeister all have provisions in their contracts that call for expedited vesting of stock options, Wall Street-based restricted shares that can drive executive compensation into the stratosphere — with no tax liability for the company.

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For example, Netflix co-founder/co-CEO Reed Hastings exercised more than 1.33 million stock options in 2020 worth more than $612 million — taxes on which Hastings, not Netflix, is responsible for.

For Sherman & Co., the payday won’t be as large, but still significant considering they are being forced out at a time when GameStop shares are trading at atypical highs due in part to a third-party turf war between individual investors and established hedge funds.

Sherman, who through the middle of the month was the largest individual shareholder, inexplicably agreed to give up $47 million in stock options and $5 million in cash as part of a severance agreement that will enable him to exercise 1.1 million in stock options worth $169 million at market close on April 23.

Bell and Homeister each have restricted shares worth $43.6 million, while Hamlin’s stock options are worth $33.5 million on paper. All three executives reportedly could receive even more as a result of performance-based clauses in their employment contracts — performance that had little to do with their management, and much more to do with market manipulation and Wall Street politics.

GameStop shares traded at $19 per share at the end of 2020. But when Cohen — reportedly a darling among individual investors — began buying shares, online trading forums on Reddit caused a crowdsourcing of sorts among followers that saw the retailer’s shares reach of peak of $483 per share in late January. In the process, some hedge funds nearly went bankrupt betting the stock would decline, or short.

“In fairness, George may have asked for this,” said Wedbush Securities media analyst Michael Pachter. “He lost all of his hand-picked executive lieutenants [with Cohen’s arrival].”

Regardless, GameStop shares opened April 26 down at $149 per share. Bank of America values the stock at $10 per share. For Sherman & Co., the next 90+ days could be maddening.

GameStop CEO George Sherman to Step Down

George Sherman, GameStop’s CEO for the past two years, is set to step down on July 31 or sooner if a successor is found before then. The nation’s largest video game retailer first mentioned a move for a new chief executive officer in a March 23 regulatory filing.

George Sherman

Sherman, a longtime retail executive, had become victim to a changing investor line-up and external political battle between independent investors and Wall Street hedge funds — the latter seeing GameStop’s stock price fluctuate wildly at skyrocketed valuations.

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Much of that investor speculation was spearheaded by Ryan Cohen, the co-founder of online pet food company Chewy and a renegade investor who became owner of 10% of GameStop stock. Cohen’s actions, which resulted in GameStop shares increasing 4,000% in value over the past six months, put him on the board as chairman.

Cohen is looking to transition GameStop from a packaged media retail to digital retailer, when in reality he just wants a chief executive attune to his business outlook. Cohen thanked Sherman for his leadership and “many decisive steps” taken to stabilize the business during COVID-19 pandemic.

“The company is much stronger today than when he joined,” he said.

Sherman, who saw the board last week yank 587,000 shares from his stock portfolio, still leaves with shares worth hundreds of millions of dollars.

Ryan Cohen

“I am very proud of what we have accomplished at GameStop over the past two years,” Sherman said. “It has been a privilege to lead so many dedicated, talented individuals, who collectively possess tremendous passion for the gaming industry. We have helped bring stability and strength to the business, including by de-densifying our store footprint, reducing costs and debt, and driving e-commerce growth.”

Video game analyst Michael Pachter with Wedbush Securities in Los Angeles, said that since early January, Cohen had “systematically” dismantled Sherman’s staff, his board and back-filled with his own candidates.

“It’s a reasonable conclusion that he would cut George loose as well,” Pachter said.