Yahoo Finance GameStop’s Ryan Cohen Says He’s Focused on Profits, Not Hype
(Bloomberg) -- GameStop Corp. Chief Executive Officer Ryan Cohen told investors he’s focused on achieving profitability at the ailing video game retailer and plans to avoid the “hype” that has buffeted the shares to extremes as part of the meme-stock frenzy.
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“Revenue without profits and prospects of future cash flow are of no value to shareholders,” Cohen said in brief remarks at the company’s annual shareholder meeting on Monday, after it had been postponed following technical difficulties last week. “This means a smaller network of stores with an expanded assortment of higher-value items that fit into our trade-in model.”
The Chewy Inc. co-founder has tried in recent years to pivot the company from a failing brick-and-mortar store into a digital storefront for the latest game releases and dabbled briefly in crypto-backed NFTs. But analysts don’t see much of a future.
Despite Cohen’s background in online sales and a cadre of Amazon.com Inc. executives he hired — and then fired — GameStop’s software revenue was down 30% in the first quarter compared with a year earlier. A local GameStop store now looks just as much like a Toys “R” Us as a retailer for the latest Call of Duty. The shops are full of racks displaying Pokemon plushies, t-shirts and Funko pop figurines. But toy sales declined 20% from 2023. GameStop has closed dozens of locations, shuttered two distribution centers and laid off employees.
“It’s a terrible business,” said Michael Pachter, an analyst at Wedbush Securities. “It’s going away. How does GameStop forestall the inevitable?”
Earlier this month, the Grapevine, Texas-based company unexpectedly reported first-quarter results that showed a wider adjusted loss than analysts expected and a 29% decline in sales. The company also announced a 75 million share sale program that raised $2.14 billion, capitalizing on a stock rally fueled by meme-stock trader Keith Gill. GameStop has now raised more than $3 billion over the past month via share sales as retail investors powered the stock higher.
Gill, who first achieved influencer fame in 2021, returned to X with a cryptic post on May 12. That fueled a 167% rise in GameStop shares through the close on June 6, adding $11 billion to its market value over that stretch. The stock was down 13% at 1:49 p.m. on Monday.
“Questions really revolve around how it can successfully manage the de-scaling of its games store business while remaining profitable and finding adjacent opportunities to try and offset the decline,” said Piers Harding-Rolls, research director for games at Ampere Analysis.
There are a few bright spots. Despite its strategic struggles, GameStop is swimming in cash that could help cover operating losses for several years. And when Sony Group Corp., Nintendo Co. and Microsoft Corp. release their next generation of video game consoles, GameStop will also likely see a boost.
--With assistance from Bailey Lipschultz.
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