GameStop profits fall short of expectations, but online sales offer some hope

Now the games retailer is working to turn the tide: Along with the earnings report, it introduced changes aimed at transforming itself into “a customer-obsessed tech company that thrills gamers,” its CEO said on Tuesday during a call with investors.

GameStop (GME) reported net sales of $ 2.1 billion in the quarter, down 3% from the same period a year earlier and slightly below the $ 2.2 billion expected by Wall analysts Street, according to Refinitiv. Net income for the quarter reached $ 80.5 million, or $ 1.19 per diluted share, well below analysts’ expectations, but a significant improvement from the $ 21 million in net income earned during its fourth fiscal quarter last year.

For the full year 2020, GameStop recorded a net loss of over $ 215 million.

One bright spot: The game retailer’s global e-commerce sales grew 175%, accounting for 34% of the company’s total net sales in the quarter. During the same period last year, e-commerce only accounted for 12% of total sales.

This bodes well for the company’s efforts to shift more to online sales, a particularly significant move given that it closed 693 stores net in 2020. It now has 4,816 stores worldwide.

“Our goal in 2021 will be to improve our e-commerce and customer experience, increase our speed of delivery, provide superior customer service and expand our catalog,” said CEO George Sherman in a statement.

Shares of the company initially jumped more than 5% in after-hours trading immediately after the release, before reversing to fall more than 10%. And while corporate earnings calls are typically dry events attended mostly by analysts and journalists, GameStop’s Tuesday call has reached maximum capacity and stopped allowing additional listeners for more than an hour. before its start.

The company’s earnings report on Tuesday is the first since a Reddit-fueled trading frenzy in late January sent Gamestop shares into a roller coaster ride – and revealed a deep divide between investors betting the retailer’s performance. struggling will get worse and those who rely on a comeback.
The company’s shares quickly fell from their wild highs during the January rally, but many investors did not give up. On Tuesday, GameStop shares closed nearly 7% lower at $ 181.75, but were still over 850% above their starting level this year.

GameStop’s plan for the future

The earnings report also comes amid a GameStop management reshuffle that is likely the work of Ryan Cohen, the billionaire founder of who invested heavily in GameStop last year and joined its board of directors. administration in January. Many investors are hopeful that Cohen will help make the game retailer a more formidable competitor in the e-commerce age.
In early February, GameStop appointed Matt Francis, former head of engineering at Amazon Web Services, as its very first CTO to oversee “the ecommerce and tech functions.” Weeks later, the company announced the resignation of CFO Jim Bell and said it would seek a new CFO with “the skills and qualifications to accelerate the transformation of GameStop.”
And on Sunday, the company said its chief clientele Frank Hamlin would also be leaving the company in late March, according to a notice filed with the Securities and Exchange Commission.
The company announced even more leadership changes on Tuesday. He appointed Jenna Owens, previously Director and General Manager of Multichannel Distribution and Execution at Amazon (AMZN) who has held operations management positions at Google (GOOGL) and Honeywell (HON) – as COO from March 29. Owens could be a key part of helping the company implement a strategy Sherman outlined on Tuesday to update its U.S. distribution network and speed up delivery times.

Neda Pacifico, formerly Vice President of Ecommerce at Chewy, will become GameStop’s new Senior Vice President of Ecommerce. And Ken Suzuki, former vice president of supply chain technology for online store Zulily, has been hired as vice president of supply chain systems for GameStop.

Wedbush analysts said in a note to investors ahead of last week’s report that they remained “fairly optimistic” that the company will return to profitability in 2021, in large part thanks to the launch of new game consoles. popular. Still, analysts are not currently recommending GameStop stock because the trading activity fueled by Reddit “has pushed the stock price up to levels completely disconnected from company fundamentals.”

GameStop has not provided any financial guidance for 2021. But Sherman used Tuesday’s call to detail a number of other strategic initiatives to turn the business around in 2021.

Among those efforts is a plan to establish a US-based “customer service operation”, the CEO said on the call. “We are focused on providing exceptional levels of customer service across all channels, no matter where, when and how our customers shop with us,” he said. “We do this through a technology-driven approach, as well as our streamlined business footprint. ”

GameStop is also looking to expand its product offerings beyond video games and consoles by adding PC gaming products, computers, monitors, mobile games, and gaming TVs. Such product offerings could expand the company’s addressable market “more than fivefold,” Sherman said.

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David A. Albanese