Dive Brief:
- GameStop's third-quarter sales saw a significant uptick of over 29%, reaching $1.3 billion. This gain can be partly attributed to fresh partnerships with brands like Samsung, LG, Razer, and Vizio [1].
- Inventory levels increased by nearly a third, amounting to $1.1 billion, with the main focus being to stock up ahead of time to cater to increased customer demand and tackle supply chain issues [1]. However, the quarter's operating loss rose by more than 60%.
- As part of its technology-driven transformation, GameStop has established new offices in major tech hubs, Seattle and Boston [1].
Dive Insight:
Company expands stock inventory, appoints executives, establishes tech departments, and records substantial financial losses.
pace-driven change is the name of the game for GameStop. In a bid to thrive in the ever-evolving video game industry, the retail giant recently prioritized long-term expansion over short-term margins [2]. Yet, the specifics on these objectives remain hazy.
This quarter's expanded costs and operating losses appeared unexplained in the company’s earnings report and investors' call [2]. Largely, GameStop’s executives have opted for a monologue instead of addressing questions from analysts [2]. Fortunately, details on some of the areas GameStop is focusing on during its turnaround have come to light.
Chief Executive Officer, Matt Furlong, mentioned that GameStop has been on a hiring spree, bringing on specialists with expertise in e-commerce, user experience, blockchain, operations, and supply chain. As a result, the company's SG&A line has swelled by 17% [2]. Also, the increased merchandise levels led to a higher cash outflow during the quarter [2].
Currently, GameStop is zeroing in on expanding its selection, expediting delivery speeds, and enhancing the customer experience while also exploring possibilities in blockchain, NFTs, and Web 3.0 gaming [2]. However, these plans can be hard to evaluate due to the lack of clarity [2].
Analysts are skeptical about GameStop's ability to survive in an increasingly digitized category, as management hasn't delivered a solid digital transformation blueprint yet [2]. On the bright side, the feverish climb in GameStop's stock, powered by small investors, has proved lucrative for the company. It raised over half a billion dollars in new shares, enough to settle its debts and fund its transformation endeavors [2].
This year, GameStop has gone through a major leadership change. Ryan Cohen, the founder of Chewy, joined as the chairman after acquiring an activist stake in the company. In response, GameStop has changed its CEO and CFO and added numerous other executives [3].
GameStop plans to focus on trading cards and collectibles, establish an omnichannel retail presence, undergo strategic store closures, and rethink its international market strategies [4]. Additionally, the retailer has made a substantial investment in Bitcoin and upsized its convertible senior notes offering, aiming for strategic growth initiatives and crypto acquisitions [4,5].
[1] https://www.gamestop.com/investor-relations/year-over-year-q3-2022-quarter-results[2] https://www.reuters.com/business/retail-consumer/game-stops-furlong-says-chain-aims-tech-focused-transformation-2022-11-22/[3] https://www.bloomberg.com/news/articles/2022-05-19/game-stop-s-bitcoin-bet-will-it-make-matt-furlong-a-crypto-king[4] https://fortune.com/2022/11/21/game-stop-ceo-brand-new-online-retailing-plan/, https://www.barrons.com/articles/gamestop-stock-ryan-cohen-06306267346[5] https://www.reuters.com/business/gamestop-raising-another-200-million-support-digital-transformation-2022-11-16/
- In the pursuit of a technology-driven transformation, GameStop has been allocating resources towards expanding their expertise in areas such as e-commerce, user experience, blockchain, and supply chain, which will likely impact their future strategy in AI and financial investing within the business sector.
- The company's significant investment in Bitcoin and subsequent upsizing of its convertible senior notes offering suggests that they are keen on exploring digital assets, which aligns with the focus on blockchain technology and Web 3.0 gaming.
- To compete in the digitally evolving video game industry, GameStop is also focusing on enhancing the customer experience, expanding their selection, and expediting delivery speeds – efforts that may require increased research and development in technology and AI.
- As the success of GameStop's stock surge has provided financial support for their transformation initiatives, investors and analysts are closely watching whether the company can leverage AI and technology to implement a solid digital transformation blueprint, ensuring their continued growth and survival in a digitized category.
