GameStop's Most Popular Earnings Call Ever Is A Bust

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Photo: Spencer Platt / Kotaku (Getty Images)

After weeks of record-breaking days on Wall Street thanks to a meme stock frenzy engineered by Reddit, people were hoping for some answers from GameStop’s executives during today’s call with investors. They got none.

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Today’s earnings call—the first since GameStop stock skyrocketed to the obscene value of over $400 a share earlier this year because of a whole complicated swirl of financial games, tech start-up scams, and social media circuses—was so popular you couldn’t even listen to it. Twenty minutes before it was set to begin, the public webcast had already hit capacity, with others taking to livestreams on Twitch and YouTube to hear what the video game retailer’s CEO would say about everything that’s going on.

Not much, it turns out. Early on, the company announced that unlike previous calls it would not have a Q&A period at the end where investors traditionally get to grill management on financial forecasts and business strategy. Instead, GameStop CEO George Sherman recited a boring list of sales figures and ended the call less than half an hour in.

The only real news came out in GameStop’s fourth quarter and full 2020 fiscal report, issued just prior to the webcast. The good news for those who have bet the house or their latest government stimulus checks on a miraculous turnaround? Online sales “increased 175% and represented 34% of net sales in the fiscal 2020 fourth quarter versus 12% of net sales in the fiscal 2019 fourth quarter.” Jenna Owens, previously a general manager at Amazon, was also confirmed as the company’s next chief operating officer, another glimmer of hope for those invested in GameStop becoming the Amazon of games.

Image for article titled GameStop's Most Popular Earnings Call Ever Is A Bust
Screenshot: GameStop

The bad news? GameStop is still ultimately in decline. It suffered $215 million in losses last year, Business Insider reports. The company also fell short of fourth-quarter expectations, despite the release of the PS5 and Xbox Series X/S. “Net sales were $2.122 billion compared to $2.194 billion in the fiscal 2019 fourth quarter,” GameStop announced. That’s a much smaller bump than when the PS4 and Xbox One released. The company blamed the ongoing pandemic and supply constraints in part, but the start of the next-gen console cycle hasn’t exactly rekindled the old GameStop flame.

Which is not surprising! Many game publishers report the share of their games being bought digitally, especially during the pandemic, continues to climb upwards past 50%. Maybe that’s why GameStop’s CEO wasn’t too keen on taking investor questions or waxing poetic about whether an inflated stock price is enough to transform the brick-and-mortar retailer into “the ultimate destination for gamers.”

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One thing Sherman did take the time to do was thank GameStop employees the world over for their “adaptiveness” to a once in a lifetime public health crisis. You know, the same one that drove many GameStop employees to speak out early last year about not receiving the proper guidance and resources needed to keep their stores safe. Even while hundreds of stores were closed, hours were slashed, and pay was kept low. And don’t forget the TikTok challenge.

While Sherman took a 50% pay cut back when the pandemic began, he’s paid largely in stock options, which at today’s closing price of $180 are currently worth hundreds of millions, at least for now. Meanwhile, GameStop’s chief financial officer, Jim Bell, departed the company last month with a $2.8 million severance package.

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Update - 9:30 a.m. ET, 3/24/21: GameStop stock fell nearly $30 in after hours trading yesterday following the news, not mentioned on the company’s earnings call but rather in a recent SEC filing, suggesting that it might sell more company stock to help fund its attempted revival.

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DISCUSSION

By
Mortal Dictata

So as everyone with any basic knowledge of the performance of Gamestop knew it’s more than likely fucked regardless of C-suite changes and the fact it’s failed to really capitalise out of new hardware launches (which was the only thing to really view in the months prior as a reason to think it might be worth a short term punt) only makes that final declaration of “we’re fucked” all the more likely to be sooner rather than later.

Also people who keep suggesting it could become “the Amazon of games” seem very good at failing to grasp the fact Amazon largely sells tangible goods and not emailed product codes, which is where all 95% gaming is going apart from Amiibos and the few physical bits and bobs that come with collectors editions and Amazon has a lot more products to fill its warehouses than just that tat. Gamestop’s reinvention is going to end up nowhere but trying to be another Steam when it’ll be trying to compete with Steam, GOG, EGS, all of whom aren’t also trying to maintain a physical store overhead. And that’s before you then also include grey market/middleman sites like G2A or CDKeys that everyone uses (come on, let’s be honest here) because you can get games at 30% discount on launch.