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GameStop misses earnings, names new COO, focuses on digital

·Markets Reporter
·3 min read

GameStop (GME), a WallStreetBets favorite and phenomena of the year, reported fourth quarter results Tuesday afternoon which missed analyst expectations on the top and bottom lines and named a new COO as it focuses on growing e-commerce sales.

The company also announced former Amazon and Google tech veteran Jenna Owens will be the next Chief Operating Officer. The stock was immediately up in after hours, before turning lower about 30 minutes later.

These are the results versus consensus Wall Street analyst estimates for the fourth quarter, according to Bloomberg:

Revenue: $2.12 billion vs $2.21 billion expected

Adjusted earnings: $1.34 per share vs $1.43 estimate

Comp sales: +6.5% vs +8.1% estimate

Global E-Commerce sales (included in comparable store 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. The company is continuing to suspend guidance at this time.

"As we look ahead, we are excited by the opportunities that are in front of us as we begin prioritizing long-term digital and e-commerce initiatives while continuing to execute on our core business during this emerging console cycle," stated CEO George Sherman.

Ahead of earnings, GameStop announced its Chief Customer Officer Frank Hamlin will be stepping down. This marks another major C-suite move since activist investor and Chewy (CHWY) co-founder Ryan Cohen joined the board of directors in January.

A pivot to digital and tech is what the future seems to hold for the struggling brick-and-mortar video game seller, with major announcements over the last few months serving as catalysts for the stock's rising price and increased retail investor speculation from the likes of Reddit's WallStreetBets.

In early February the company announced Matt Francis, a former engineering leader from Amazon Web Services, would come on board as its first-ever chief technology officer. GameStop also announced its Chief Financial Officer Jim Bell would be resigning — news which sent the stock soaring more than double at the time.

Wall Street analysts have highlighted shares of the video game retailer have been trading detached from fundamentals. Currently the stock has no analyst Buy ratings, 4 Holds, and 3 Sells, according to Bloomberg data.

GameStop was the target of a massive short squeeze by retail investors in January when shares peaked at $483 intraday on January 28. The stock has since been on a volatile ride but still up more than 870% year-to-date as of Tuesday morning, hovering at around $185/a share.

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Shortly after starting is earnings call, management announced there would be no question and answer period.

Analysts and retail investors may have been hoping to hear management's thoughts on the recent frenzy over GameStop's stock. The company has been tight lipped about the January short squeeze on shares prompted by WallStreetBets.

In an SEC filing GameStop said it is considering wether to sell common stock "primarily to fund the acceleration of our future transformation initiatives.”

The January short squeeze prompted hearings on Capitol Hill and increased scrutiny into the trading platform RobinHood, which temporarily restricted buying GameStop and other heavily shorted stocks.

Much of the focus has also turned to the rise of retail investors and influence of online forums. Keith Gill — the user known as "Roaring Kitty" on Youtube, told the House Financial Services Committee in February that he believed GameStop can pivot toward a technology-driven business, and"by embracing the digital economy, GameStop may be able to find new revenue streams that vastly exceed the value of its business."

As for the worldwide attention on the stock, data from Placer.ai indicates the GameStop phenomena may be correlated with an upward trend in foot traffic at the retailer in recent months.

"The week of December 28th, for instance, visitor counts were down almost 18% year-over-year. But as of the beginning of March, they were only down around 4%," according to Placer.ai.

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Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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