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.

GameStop Partners With ‘Buy Now, Pay Later’ Company Ahead of Expected Winter Video Game Market Surge

With Microsoft and Sony unveiling pricing and release dates (Nov. 10 and 12, respectively) for next-generation video game consoles and software, GameStop has partnered with QuadPay to offer consumers an in-house “buy now, pay later” financing option that incorporates their existing credit or debit cards.

GameStop is seeking to build out the capabilities and services of its digital and in-store ecosystem by offering gamers a variety of payment options to more-affordably purchase video games and other merchandise this holiday season.

QuadPay lets consumers split any purchase into four interest-free installments paid over six weeks using their existing credit card or debit card when they shop online or in-store. It is available at GameStop’s retail stores and at GameStop.com.

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“As we continue to find new ways to expand the purchasing choices for our customers, we are pleased to partner with QuadPay to offer a new flexible payment option that will enable customers to affordably purchase the products they want from us this holiday season,” Chris Homeister, chief merchandising officer for GameStop, said in a statement.

The financing option comes as Microsoft reintroduced its Xbox All Access, enabling consumers to split the cost of a console purchase for $24.99 monthly over 24 months.

GameStop joins QuadPay’s network of more than 4,700 integrated merchants and global retailers. Within days of implementing their system, QuadPay claims merchants typically see an increased conversion rate up to 20%, and average order values increase up to 60%.

GameStop Narrows Q2 Loss; Sales Fall 27%

Video game retailer GameStop Sept. 9 reported a second-quarter (ended Aug. 1) loss of $111.3 million, which was a significant improvement from a loss of $415.3 million during the previous-year period. Revenue fell 22% to $942 million, from $1.3 billion a year ago.

The world’s largest video game brick-and-mortar retailer said the coronavirus pandemic helped reduce some operating costs while propelling the chain’s e-commerce sales. The quarter saw an 800% increase in global online sales, and a $133.7 million reduction in SG&A expenses — underscored by a 50% reduction in inventory costs and $181.9 million in free cash flow for the quarter.

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“We believe the actions we are taking to optimize the core operations of our business by increasing efficiencies and creating a frictionless digital ecosystem to serve our customers, wherever and whenever they choose to shop, are enabling us to navigate the COVID-19 environment, while positioning us well for the launch of the next generation of consoles,” CEO George Sherman said in a statement.

The CEO said the quarterly revenue decline was due to the impact of operating during the last few months of a seven-year-long current-generation console cycle and the subsequent limited availability of hardware and accessories; a 13% reduction in total store operating days due to store closures driven by the pandemic; and a 10% reduction in the store base, as part of the company’s “de-densification” strategy, partially offset by almost 40% of closed store sales recaptured through the transfer to neighboring locations and online, leading to improved cash flow.

Comparable store sales declined 12.7%, adjusting for fewer store operating days due to store closures as a result of the global COVID-19 pandemic.

“While the ongoing pandemic continues to create a somewhat uncertain environment in the short term, we are very pleased by the consumer response at GameStop to the few recent video game product introductions and we believe we are ready, with expanded service and payment options, to handle the expected surge in demand and participate in a very significant way in the console launches later this year,” Sherman said.

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, said GameStop’s top-line results were ahead of management’s initial expectations driven by heightened ongoing consumer demand during the pandemic, along with particular strength from the chain’s e-commerce channel.

“We believe management is executing nearly flawlessly in what had previously appeared to be a hopeless situation,” Pachter wrote in a Sept. 10 note.

Activist Investors Join GameStop Board

GameStop investors Hestia Capital Partners and Permit Capital Enterprise Fund, who own about 7.3% of the video game retailer’s outstanding shares, June 12 announced that, based on preliminary voting results, the investor group’s two nominees, Paul J. Evans and Kurtis J. Wolf, have been elected to the retailer’s board of directors.

John Broderick, partner with Permit, said the independent nominees to the board will prove complementary to those already on the board.

“Together, we believe these individuals will help GameStop realize its significant potential in the gaming industry,” Broderick said.

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In March, GameStop CEO George Sherman announced the appointment of three new members to its board, including Reginald Fils-Aimé, William Simon and James Symancyk.

The activist groups believe GameStop should add stockholder-aligned directors who have the financial acumen, turnaround experience and stockholder perspective to drive “real change” at GameStop.

The board changes come as GameStop faces increased challenges in a retail market undermined by digital streaming and lack of new-generation hardware. The chain lost $130 million in the first quarter (ended May 2). This compared with net income of $6.8 million during the previous-year period.

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“GameStop is a unique player in the gaming industry, and we are excited to be a part of the company’s next generation of leadership,” Wolfe said. He believes the board additions will help unlock GameStop’s “significant latent” value.

“We hope that all stakeholders, particularly the company’s critically valuable customer-facing employees, can feel confident that GameStop’s best days are ahead of it,” Wolfe said.

GameStop Closes 100 Stores Due to Civil Unrest, Floyd Memorial

GameStop June 9 said it temporarily shuttered 100 stores in the United States to protect employees from violence and looting as a result of civil unrest following the Memorial Day killing of George Floyd at the hands of Minneapolis police. The nation’s largest video game chain said 35 of the stores would be closed indefinitely due to damages sustained by protesters.

Speaking on the fiscal call, CEO George Sherman said that as an act of solidarity for social justice, all GameStop stores in Minneapolis, Fayetteville and Houston were closed for their respective Floyd memorial services.

“At GameStop, we stand against this injustice,” Sherman said.

As previously disclosed, GameStop announced it lost $130 million in the first quarter (ended May 2). This compared with net income of $6.8 million during the previous-year period.

The nation’s largest video game retailer attributed the loss to store shutdowns due to the coronavirus pandemic, a $53 million non-cash tax charge associated with the valuation allowance against deferred tax assets, an additional $18.5 million in incremental wages paid to our hourly associates to help offset lost wages due to store closures from the pandemic, and approximately $3 million in incremental costs associated with safety materials and equipment to ensure the safety of our customers and associates.

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March 22 GameStop temporarily closed all 3,526 of its U.S. locations — with approximately 65% of these locations conducting a limited curbside pickup offering. During the final six-weeks of the fiscal quarter, about 90% of the company’s global stores were closed to customer access and only Australia, which represents about 10% of the global store count, remained fully open and accessible to customers; another 42% remained open for limited curbside delivery and 48% remained fully closed. In Australia, where all stores remained open for business during the first quarter, increased demand drove a 35% comparable store sales increase.

Sherman remained upbeat on the numbers, suggesting that without COVID-19, the chain has turned a fiscal corner back to profitability.

“Our performance included total sales just shy of our original expectations, even as stores closed due to the pandemic and key video game titles shifted to the second and third quarters, exacerbating the headwind from operating in the final stage of a console cycle,” Sherman said in a statement. “Even more impressive is that our e-commerce sales grew 519% and more than 1,000% during the six weeks that our store base temporarily closed to customer access. We believe this reflects the loyalty of the GameStop customer and the confidence they place in us as their preferred place to shop.”

At the end of May, GameStop had approximately 85% of its U.S. locations open to limited customer access or curbside delivery, and approximately 90% of its international locations open.

GameStop Expects $170 Million Q1 Loss, 35% Sales Decline Due to COVID-19

GameStop June 5 jumped ahead of fiscal bad news, announcing preliminary results for the first quarter (ended May 2). The world’s largest video game retailer said it expects to post a fiscal loss of $170 million for the period, compared to a loss of $6.8 million in the previous-year period.

Global sales are expected to drop upwards of 35% to $975 million from $1.5 billion in the prior year fiscal quarter. Comparable store sales are expected to decrease about 30% to 31%. Excluding stores that were closed as a result of the COVID-19 pandemic, comparable store sales are expected to decline from 16% to 17%.

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GameStop expects hardware sales to be a larger percentage, and software sales to be a smaller percentage, of total sales in the first quarter of fiscal 2020 compared to the prior year fiscal quarter.

GameStop was hit hard by the coronavirus, with about 76% of the chain’s 1,802 international stores temporarily closed beginning in March. On March 22, the company temporarily closed all 3,526 of its U.S. locations — with about 65% of the locations conducting a limited curbside pickup offering. During the final six-weeks of the fiscal quarter, about 10% of stores worldwide remained fully open and accessible to customers; about 42% remained open for limited curbside delivery and 48% remained fully closed.

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“Despite the disruption caused by the pandemic, we are pleased to see our strategic investments in omni-channel capabilities allow us to deliver on the increased demand for gaming, entertainment and remote work products,” CEO George Sherman said in a statement.

GameStop officially reports Q1 results on June 9.

Investor Group Seeks Board Changes at GameStop

An investor group is looking to change the board of directors of fiscally challenged video game retailer GameStop — despite recent changes to the chain’s board.

Hestia Capital Partners LP, Permit Capital Enterprise Fund, L.P. and their affiliates, which own about 7.2% of the outstanding common stock of GameStop, April 27 announced they have mailed a definitive proxy statement to shareholders for the retailer’s annual virtual meeting in mid-June.

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The investor group says recent board “refreshment” is insufficient and contends the board should be primarily composed of directors with traditional retail backgrounds.

In March, GameStop announced the appointment of three new members to its board, who it claimed had strong retail backgrounds. They included Reginald Fils-Aimé, William Simon and James Symancyk.

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The activist group believes GameStop should add stockholder-aligned directors who have the financial acumen, turnaround experience and stockholder perspective to drive “real change” at GameStop.

The group is urging shareholders to vote in its nominees, who include Paul Evans and Kurtis Wolf. If elected, it says the nominees would push GameStop to reduce its “bloated” cost structure, fix misaligned executive compensation, address liquidity concerns, focus on optimizing the chain’s gaming assets, and create a “positive” narrative about the company’s future.

In a statement, the group acknowledged the “unfortunate” timing of the proxy contest due to the COVID-19 crisis, but said the lack of diversity of perspectives on the board and its resistance to engage with them to avoid a contested election, had “compelled” it to move forward with its nominations.

The proposed board changes come as GameStop faces increased challenges in a retail market undermined by digital streaming and lack of new-generation hardware. The company reported a 27.5% decline in winter holiday sales. Comparable store sales decreased 24.7%.