GameStop Reportedly Looking for New CEO

GameStop, the world’s largest video game retail chain that has seen its stock fluctuate wildly in recent months due to third-party speculation, is reportedly looking for a new CEO, and has hired an executive headhunter.

Reuters, citing sources, said the retail chain is looking to replace CEO George Sherman as it increasingly focuses on digital distribution. Sherman, who was named CEO two years ago, has a 25-year career in brick-and-mortar retail, with executive stints at Advance Auto Parts, Best Buy, Target and Home Depot.

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George Sherman

GameStop recently named Ryan Cohen, founder of online pet store Chewy, as its chairman of the board. The move came after Cohen, who acquired about 10% of the company in 2020, had several associates named to the board in January.

Last month, GameStop hired two former Chewy executives, Andrea Wolfe and Tom Petersen, in addition to hiring former Amazon executive Elliott Wilke as chief growth officer.

Ryan Cohen

Cohen is no ordinary executive. The 35-year-old is reportedly revered by individual stock traders for his outside-the-box thinking. In fact, it was Cohen who help jumpstart online community social media platform Reddit’s impassioned interest in GameStop and other stocks earlier this year. The enthusiasm, which pitted individual and day traders against hedge funds — the latter looking to short the stock — made headlines as GameStop’s price-per-share skyrocketed based little on the company’s performance. GameStop shares are up almost 4,000% from a year ago.

GameStop Creates Chief Growth Officer Position, Among Other New Hires

With its stock popular among investors and day traders, video game retailer GameStop March 30 announced the appointment of Elliott Wilke to the new role of chief growth officer. Wilke’s start date is April 5.

Elliott Wilke

Wilke brings nearly two decades of branding, consumer goods and e-commerce experience to GameStop. He joins from Amazon, where he spent the past seven years holding a variety of senior roles across segments such as Amazon Fresh, Prime Pantry and Worldwide Private Brands. He began his career at Proctor & Gamble and spent more than a decade in brand manager and marketing roles of increasing responsibility.

At GameStop, Wilke will oversee growth strategies and marketing, with a focus on increasing customer loyalty and growing the reach of Power Up Rewards and Game Informer. He will also work with other initiatives that include expanding the company’s use of customer insights and metrics to optimize channel marketing.

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Andrea Wolfe

In addition, GameStop hired Andrea Wolfe as VP of brand development. Wolfe, who previously served as Chewy’s VP of marketing, started March 29. She has held executive and director-level marketing roles at companies such as Outdoorsy, Spreetrail and Whole Foods. In her new role, Wolfe will help drive branding, content, social media strategy and other digital initiatives.

Tom Petersen

GameStop also named Tom Petersen VP of merchandising. Petersen also previously served in the same position at Chewy, whose co-founder Ryan Cohen is a big investor in GameStop.

 

GameStop Q4 Profit Skyrockets, Driven by E-Commerce

GameStop on March 23 disclosed fiscal results for the fourth-quarter, ended Jan. 30, which saw net income skyrocket 391% to more than $80 million, from a profit of $21 million in the prior-year period.

The increase was driven by a  175% rise in e-commerce sales, which represented 34% of net sales in the quarter versus 12% of in the previous-year quarter. Same-store sales increased 6.5%.

GameStop, the nation’s largest video game retailer, has been on a rollercoaster ride this year, the result of being in the crosshairs of third-party speculators manipulating the company’s stock price based little on actual performance and more on mob rule.

Revenue in the quarter dropped less than 4% to $2.122 billion, compared with $2.194 billion last year, reflecting an operating environment that included a 12% decrease in the store base due to the company’s “de-densification” efforts and a reduction of approximately 27% in European store operating days during the quarter in response to the COVID-19 pandemic. The company wound down operations in Denmark, Finland, Norway and Sweden.

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For the fiscal year, GameStop narrowed its fiscal loss nearly 55% to $215 million, from a loss of $471 million in 2019. Revenue declined more than 21% to $5.09 billion, from $6.5 billion.

“I am proud of how our entire organization came together in 2020 to adapt to the challenging pandemic environment, effectively serve our customers’ demand for gaming and entertainment products, and navigate through the year with strong liquidity and a strengthened balance sheet,” CEO George Sherman said in a statement.

Sherman said the retailer is off to a strong start in 2021, with same-store sales up 23% in February, led by global hardware sales.

“Our emphasis in 2021 will be on improving our e-commerce and customer experience, increasing our speed of delivery, providing superior customer service and expanding our catalog,” he said.

 

GameStop CFO Exits, Stock Skyrockets

The rollercoaster Wall Street existence of GameStop took another surge skyward Feb. 24 — the day after CFO Jim Bell announced his resignation, effective March 26. The video game retailer’s shares surged up more than 100% to close at $91.71 per share. The volatility echoed recent market swings for the retailer after it became caught up in a high-profile battle between independent day traders and established hedge funds — the latter looking to short the stock; in effect betting on the retail chain’s demise in an era of online games and subscription gaming.

Bell had been recently criticized by activist investor Ryan Cohen, founder/former CEO of Chewy, for not being more aggressive pushing GameStop toward digital gaming. Cohen, 35, sold Chewy to PetSmart in 2017 for $3.35 billion. He is now reportedly the single largest individual investor in Apple.

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Diana Jajeh
Jim Bell

GameStop said that if a permanent replacement was not in place at the time of Bell’s departure, it intends to appoint chief accounting officer Diana Jajeh to the role of interim CFO. Jajeh has more than two decades of experience operating as an auditor, comptroller and corporate finance executive. After beginning her career at PricewaterhouseCoopers, she subsequently held senior roles at companies such as Visa and e.l.f. Cosmetics.

GameStop Meets Social Media Investor Mob

When GameStop, the world’s largest video game retailer, started the year less than a month ago, its stock was trading around $19 per share — underscoring the market’s ongoing concern about packaged-media gaming in the digital age.

But that lull has been blown to pieces over the past few days as speculative at-home investors took to social media platform Reddit and began playing up the stock to some of the platform’s 3 million users. In the process, GameStop shares skyrocketed 1,700% to $347 per share, triggering mandatory trading stops by Nasdaq in an attempt to keep the stock, and the market, stable. The stock was up 8,949% (!) over the past 12 months.

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“You combine the power of technology, which allows you … to magnify your individual impact, with some use of leverage and very targeted bets, they can have a significant influence, particularly on areas of vulnerability because of the short positions,”  Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC.

GameStop shares sank early on Jan. 28 as trading platforms including Robinhood and Interactive Brokers restricted trading in the video game retailer. The stock opened at $265 a share and briefly rose to $483 before plummeting to $112. As of 11:45 a.m. EST the stock had rebounded to $225.

The frenzy has defied some Wall Street hedge funds and analysts unaccustomed to seeing day-traders on social media trigger a “short squeeze,” which occurs when a stock skyrockets quickly in value, forcing short sellers (including hedge funds) who had bet that the stock price would fall, to buy again in order to forestall even greater losses. It’s a cruel trading strategy magnified by “mob rule,” with some participants looking for paper wins at the expense of others.

“This is gaining cult-like status,” said Quincy Krosby with Prudential Financial. “It is a pack of traders and the pack is gaining momentum. The retail crowd is not just taking over the shorts and it’s taking over the headlines.”

Indeed, GameStop has been the biggest trending retail market story this week. Longtime video game analyst Michael Pachter contends GameStop is well-positioned to be a primary beneficiary of the new PlayStation and Xbox consoles from Sony and Microsoft, respectively. The video game industry concluded a record 2020 that saw revenue explode to $57 billion, with December sales up 25% due to the new consoles.

“We remain quite optimistic that [GameStop] will return to profitability by fiscal-year 2021,” Pachter wrote optimistically in a Jan. 11 note.

Fast-forward to the present and Pachter shakes his head at the craziness while maintaining a “neutral” rating on the GME stock he values at $19 per share.

“It’s just a feeding frenzy,” Pachter said in a media interview. “There’s nobody in this stock based on fundamentals.”

Indeed, recent fundamentals saw GME worldwide sales results for the nine-week holiday period, ended Jan. 2, increase 4.8% in comparable store sales and 309% in e-commerce sales. But total sales declined 3.1%, driven by an 11% decrease in GameStop’s store base due to a planned “de-densification” strategy, temporary store closures around the world due to pandemic-related government mandates, and lower foot traffic in stores.

“The guys buying [GME shares] at $300 think some greater fool will buy at $400, and so far the greater fools  keep showing up,” Pachter said. “It’s a pyramid scheme.”

Sen. Elizabeth Warren (D-Mass.), a longtime advocate for stricter Wall Street regulations, says the uproar from institutional investors about GameStop trading is disingenuous in the face of the investment industry’s long history of questionable self-dealings and operating counter to actual economic concerns.

“For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price,” Warren said in a Jan. 27 social media post.

GameStop Stock Skyrockets During Wall Street Debate

Shares of GameStop, the world’s largest video game retailer, shot up 50% in pre-market trading as the company’s stock opened around $90 per share — almost five times higher than 14 days ago. The reason: An ongoing battle between short sellers and investors on the future of retail gaming.

The video game industry just concluded a record 2020 that saw revenue explode to $57 billion, with December sales up 25% due to new game consoles from Sony PlayStation and Microsoft Xbox.

Texas-based GameStop, which has struggled to remain relevant during the ongoing transition to digital gaming, saw operations further threatened during the early days of the pandemic. Then following increased numbers of home-bound consumers due to government-mandated orders to help stop the spread of the coronavirus, business fortunes began to rise.

On Jan. 11, GameStop announced the addition of new board members, including Ryan Cohen, co-founder of Chewy. That move set off a battle of words between short-selling firm Citron Research and speculative buyers organizing on social media. Sales of company shares exploded with more than 194 million shares changing hands on Jan. 22 — up more than eight times the daily average of 23.8 million shares.

In the process, the stock shot up from $2.57 per share on April 3, 2020, to close to $76.76 on Jan. 22, 2021.

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For myriad investors looking to short the stock, i.e. borrowing stock through a broker with hopes to profit from a decline in share prices, the rising stock price wiped out their endgame.

“[GameStop] is a failing mall-based retailer,” Andrew Left, CEO of Citron, said in a YouTube video — adding that anyone buying GameStop shares at elevated prices were “the suckers at this poker game.” Investors kept buying shares anyway.

GameStop earlier in the month reported a 4.8% increase in same-store sales during the nine-week holiday period ended Jan. 2, 2021, and a 309% increase in e-commerce sales.  Total sales declined 3.1%.

“The company won’t execute a turnaround by selling custom gaming PCs or collectibles,” wrote one investor. “This isn’t a deep value stock anymore. It’s a momentum bubble.”

GameStop Reports Winter Holiday Sales Boost Despite Pandemic, New Gaming Console Shortages

GameStop reported that worldwide sales results for the nine-week holiday period ended Jan. 2 reflected a 4.8% increase in comparable store sales and a 309% increase in e-commerce sales. Total sales declined 3.1% driven by an 11% decrease in the company’s store base due to a planned “de-densification” strategy, temporary store closures around the world due to pandemic-related government mandates and lower store traffic, particularly later in December, due to the significant impacts of COVID-19.

Total comparable store sales increased 4.8% compared with last year and reflected a 29.6% sequential improvement from the third quarter of fiscal 2020.  The positive results were adversely impacted in the high single-digit to low double-digit percentage point range, as a result of a significant reduction in consumer traffic related to the increase in COVID-19 cases.

Net sales were $1.77 billion, a 3.1% decrease compared to 2019, as strong console demand for PlayStation 5 and Xbox Series X and Series S systems was offset by store closures mandated by local governments due to COVID-19, and industry-wide limited supply of new gaming consoles, and supply chain constraints broadly.

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E-commerce sales, which are included in comparable store sales, rose 309% and represented approximately 34% of total company sales, with total worldwide online sales year to date reaching over $1.35 billion, far exceeding management’s $1 billion growth objective.

Regional sales in Australia and New Zealand, where the GameStop’s operations were materially less impacted by the effects of the pandemic, total comparable sales for the nine-week period increased approximately 31%, outperforming the other operating regions.

“Demand for the new generation of consoles remains very strong, and as a result, we anticipate the consumer’s excitement for the new console technology will benefit us going forward well through 2021,” CEO George Sherman said in a statement.

GameStop’s current fourth quarter ends Jan. 30.

GameStop Explodes Q3 Online Sales, Narrows Loss

GameStop, the world’s largest video game retailer, Dec. 8 reported a 30% decline in third-quarter (ended Oct. 31) revenue to $1 billion, from $1.4 billion during the previous-year period. Same-store sales from about 2,000 stores dropped 24.6%, due in part to a 11% decline in stores operating.

GameStop attributed the declines to a seven-year gap in new game consoles, coupled with the ongoing pandemic and mandated store closings earlier this year. The chain saw a 257% increase in global e-commerce sales, representing more than 18% of total net sales and nearly 25% year to date. Due to reduced operations and overhead costs, the retailer narrowed its net loss nearly 78% to $18.8 million from a net loss of $83.4 million.

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“We begin the fourth quarter with unprecedented demand in new video game [PlayStation 5, Xbox Series X and Series S] consoles that launched in November, which drove a 16.5% increase in comparable store sales for the month, despite being closed on Thanksgiving Day and the impact of [pandemic] related store closures, which affected most of our European footprint,” CEO George Sherman said in a statement.

CFO Jim Bell anticipates, for the first time in many quarters, that the current fourth quarter will include positive year-on-year sales growth and profitability, reflecting the introduction of new gaming consoles, elevated omni-channel capabilities and continued benefits from cost and efficiency initiatives.

“Over the past 18 months, we have remained steadfast in focusing on creating a more efficient business model,” Bell said. “These efforts, despite the impacts of a global pandemic, have led to a stronger balance sheet.”

 

GameStop Inks Strategic Partnership With Microsoft

Video game retailer GameStop Oct. 8 announced it has entered into a multiyear strategic partnership agreement with Microsoft to help expand its physical and digital video game offerings in the cloud, as well as enhance the chain’s retail technology infrastructure.

GameStop operates more than 5,000 retail stores worldwide, in addition to an e-commerce platform and the PowerUp Rewards customer loyalty program. Through the partnership, GameStop hopes to standardize its business operations via Microsoft’s cloud solutions and hardware products to deliver enhanced digital “experiences” to customers.

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“This is an exciting day at GameStop as we announce the advancement of an important partnership that capitalizes on the power of our operating platform and significant market share in gaming to accelerate our digital transformation; drive incremental revenue streams; and over time, further monetize the digital world of gaming,” CEO George Sherman said in a statement.

Under the agreement, GameStop will standardize its back-end and in-store operations with Microsoft’s portfolio of cloud-based business applications and customer data. This is to enhance store personnel with integrated business operations, including finance, inventory, e-commerce, retail and point-of-purchase sales.

For example, cloud-based in-store software could enable store personnel to access information on a customer’s gaming preferences and purchase history in real time on product availability, subscriptions, pricing, and promotions in order to provide a differentiated and more personalized in-store shopping experience.

GameStop plans to roll out Microsoft Office 365 and Microsoft Teams to its stores, empowering more than 30,000 store associates with enhanced productivity and collaboration tools.

“By harnessing the power of Dynamics 365 and Microsoft 365, GameStop will be able to modernize its technology infrastructure and support store associates and consumers in new and exciting ways,” said Matt Renner, president of U.S. Enterprise Commercial at Microsoft.

Store associates will be equipped with new Microsoft Surface devices,  enabling them to move freely within the store footprint, meeting the needs of customers faster and more efficiently.

GameStop is also expanding its Xbox family of product offerings to include Xbox All Access, which provides an Xbox console and 24 months of Xbox Game Pass Ultimate to players with no upfront cost. GameStop and Microsoft will both benefit from the customer acquisition and lifetime revenue value of each gamer brought into the Xbox ecosystem.

“GameStop’s extensive store base, focus on digital transformation in an omni-channel environment and expert gamer associates remain an important part of our gaming ecosystem,” added Phil Spencer, EVP of Gaming at Microsoft.

Another Investor Wants Say on GameStop Restructuring; Shares Up 20% in Pre-Market Trading

Everyone wants a seat on a resurgence bandwagon. After Sony and Microsoft disclosed winter release dates and pricing for next generation PlayStation 5 and Xbox Series X and Series S video game consoles, interest in retail chain GameStop and how it’s run is booming — at least afterhours.

RC Ventures Sept. 21 increased its stake in GameStop to 9.9% from 9.6%, and said it had met with the retailer’s CEO George Sherman and senior management. No doubt Ryan Cohen (“RC”) wants a seat at the table entering the winter holiday retail season. And when Hestia Capital Partners and Permit Capital Enterprise Fund, who own about 7.3% of the video game retailer’s outstanding shares, joined the GameStop board in June, Cohen’s desire makes sense.

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And the market apparently agrees, sending GameStop shares up more than 20% in aftermarket trading to $10.54 per share. That followed a general retail decline yesterday that saw the chain’s shares close down 7.6% at $8.75 per share.

Regardless, GameStop shares are up 100% over the past two months with the chain realizing $200 million in cost restructuring in 2020 — notable achievements in a market jittery as it sees GameStop as a relic of the past when consumers were going to physical stores to buy, sell, and trade video games.

Purnha Investment Research contends investors and consumers may be ignoring the power of GameStop’s brand in the gaming space. It says that after years of restructuring, the GME stock is trading at valuations cheaper than other restructuring plays in the retail space.

“What the market has yet to acknowledge is that all is still not lost,” Purnha wrote in a Sept. 22 note.

Indeed, the firm notes that GameStop has been able to fulfill 70% of all online purchases picked up at local stores — even within an hour or two. With the new consoles have a disk drive, they continue to cater to a gamer playing both physical and digital software — at least for the next several years.

“Retail stores play a strategically important role for console manufacturers — be it for brand building, maintaining the relationship with hardcore users and collectors, educating customers, or sale of accessories,” Purnha wrote.