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GameStop Ain't Doing So Great

GameStop ain't doing so great these days. Not after their most recent earnings call.

Before anyone jumps at me for being an aggressive anti-GameStop bear, know the following:

Writing this article as a hardcore, dyed-in-the-wool GameStop enthusiast feels like making a confession at the altar of my loyalty. As someone who held an intrinsic presence in the GameStop: Rise of the Players documentary, now streaming on Hulu, my fervor for the company is well-known by many. Yet, the recent events compel me to betray that optimism and turn a TAD more bearish on the long-term potential of a corporate resurgence, assuming nothing changes. Yes, GameStop is still sitting on a pile of money from a stock sale, so they have that going for them.

GameStop's latest turn of events unfolded dramatically with the termination of its CEO, Matt Furlong. Revealed through a press release that also announced the appointment of Ryan Cohen as the executive chairman, CNBC reports no grounds were stated for Furlong's dismissal. His tenure was brief, having joined GameStop in June 2021 after a stint with Amazon's Australian business. His departure marks the departure of the sixth CEO since 2017 (BIG YIKES), tracing a string of executives that included J Paul Raines, Michael K. Mauler, Dan DeMatteo, Shane Kim, and George Sherman.

These internal shifts coincided with the disclosure of the company's first-quarter results for the financial year. GameStop posted net sales of $1.2 billion, marking a 10% drop year-on-year from $1.4 billion, and a net loss of $50.5 million, a substantial reduction from losses of $157.9 million in the same quarter last year. Though the losses have lessened, it signaled GameStop's return to the red after its first profitable quarter in several years at the end of fiscal 2022.

The sense of doom-shrouding GameStop has thickened following this quarterly earnings report. Predicting doom for GameStop is not ground-breaking; it has been looming for a considerable time. The looming specter of digital distribution has shadowed the brick-and-mortar physical game retailer for years, a threat acknowledged and countered by successive management teams. The debate about whether more precise execution could have altered the company's trajectory remains open.

The notion that Cohen's entrance holds the magical solution is not persuasive. His stint of influence spans several years, but the business's core remains unchanged, and the user experience, whether online or in-store, has not improved significantly. Quite the contrary, it may have deteriorated. Neither Cohen nor his management team has offered a strategy to rescue the company from its fate beyond the buzzwords "e-commerce" and "technology." The consumer shift to digital distribution, a nemesis that GameStop grapples with, has shown no signs of a reversal. The chant 'OMNICHANNEL OMNICHANNEL OMNICHANNEL' still echoes in my mind, awakening me in cold sweats each evening - and TWK..K.

On the plus side, a big insider buy took place today and the stock is, at least for now, back on the rise. But sadly, GameStop's demise seems increasingly unavoidable without a major change.

The most tragic aspect of this trajectory lies in the real-life impact on those associated with the company - the hard-working employees, the customers who still find value in their shopping experience, and the vendors who use the store to distribute their products. Selling open box items as new still to this day, is beyond unbelievable, and I wonder if it toes the line of even being legal.

GameStop Ain't Doing So Great
I can't see anything up those long sleeves

While Cohen's Bed Bath and Beyond move rubbed me the wrong way, if he has a strategy to defy this inevitability for GameStop, it's high time to unveil it. After what he did to BBBY, who's to say he won't do the same to GameStop and leave them high and dry as well? Oh, and the retailer said it would not hold a conference call to discuss this quarter's performance with investors. That really grinds my gears. Cohen, you OWE it to your investors to be open and discuss your plans. You've had more than enough time to be "secretive" and have zero success in terms of real-world business.

Despite my skepticism, I genuinely hope it works. Deep down, I STILL believe in the realistic possibility of an infinity squeeze for this company to really go to the moon financially via the stock market, but that won't happen without a key in the ignition. Something that is sorely lacking these days, it would seem.

I currently hold no position in GameStop $GME, nor do I have plans to open a position on either side. Just chewing popcorn from the sidelines these days, enjoying the show. ~Smash

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