Former Chewy CEO tries to push GameStop to become the Amazon of the video-game industry – Amazon News

Curated by WorkingFromHome

This article is an excerpt from the original article found in the Read More link – please follow for full article.

Game Stop store in New York City.

Michael Brochstein | LightRocket | Getty Images

The shift away from brick-and-mortar retailers in favor of online shopping has hurt GameStop over the past decade, pushing the company’s stock down nearly 40% in that time period.

But Ryan Cohen, the former CEO of Chewy, thinks the maligned video-fame retailer can turn itself around by shifting its focus away from physical stores in favor of a building robust e-commerce platform. Cohen thinks GameStop can use its brand and large customer base to make that transition. He has taken a large stake in the company to try and push it in that direction.

Company: GameStop Corp (GME)

Business: GameStop is a retailer that sells video game hardware, physical and digital video game software, video game accessories, as well as mobile and consumer electronics products and other merchandise primarily through retail operations, with all stores engaged in the sale of new and pre-owned video game systems, software and accessories.

Stock Market Value: $828 million ($12.71 per share)

Activist: Ryan Cohen

Percentage Ownership: 9.98%

Average Cost: $5.98

Activist Commentary: Cohen is not an activist but an extremely successful entrepreneur. Cohen is the co-founder and former CEO of e-commerce company Chewy, which he built up and sold to PetSmart in 2017 for $3.35 billion. Cohen remained CEO following the acquisition until March 2018, and in June 2019, Chewy went public at a valuation of $8.7 billion. This is Cohen’s first 13D filing, but what he lacks in activist experience he makes up for in strategic and operational qualifications in building and running a company in the digital era, giving him a ton of credibility here, even more so than the average activist with respect to certain areas.

What’s Happening:

On Nov. 16, 2020, Cohen sent a letter to the company’s board, urging them to immediately conduct a strategic review and to provide stockholders with a credible and publicly available roadmap for cost containment, prioritizing profitable retail locations and geographic markets and building the e-commerce ecosystem.

Behind the Scenes:

Cohen resorted to this public letter because his private attempts were not productive. GameStop sells video games and consoles and has been bearishly compared to Blockbuster. Cohen does not make that direct analogy, but he certainly paints the picture of a company that is on that same path if it does not change.

Sales have declined from $9.5 billion in fiscal year 2011 (before the last console cycle) to $6.4 billion in fiscal year 2019; EBITDA has dropped from $839 million in 2011 to only $111 million in 2019; net income has fallen from $339 million in 2011 to a loss of $470 million in 2019; and in the two most recent quarters alone, the company lost another $277 million. All of this happened while the size of the global gaming market has grown by more than 2.5x since the last console cycle. Cohen sees a company that is stuck in a brick-and-mortar mentality and is unwilling to embrace the digital mindset necessary to grow with gamers.

However, Cohen also sees a company with valuable assets, including a strong brand and large customer base and a path to success and shareholder value. He believes the company can be the ultimate destination for gamers, but that destination must start with a strong e-commerce platform that provides competitive pricing, broad gaming selection, fast shipping and a truly high touch experience that excites and delights customers, including content and community. It needs to become the Amazon of gaming, with the added expertise and specialized customer service as a key differentiator.

To do this, Cohen urges the company to cut excessive real estate costs, streamline or sell non-core operations in Europe and Australia and hire the right talent. While Cohen does not specifically target CEO George Sherman, he does note that Sherman has substantial experience working for large brick-and-mortar retailers such as Advance Auto Parts, Best Buy and Target and is committed to a twentieth century focus on physical stores and walk-in sales despite the transition to an always-on digital world.

The company is at an inflection point to make this change. Cohen notes that the company will be able to temporarily mask some of its issues with the new console cycle that will appear to validate its adherence to an outdated business model that is overdependent on brick-and-mortar sales. However, it is also this new console cycle and additional sales that can provide the cash flow to finance this strategy change into the future as the global gaming market is expected to reach $174.9 billion this year and $217.9 billion by 2023. 

Cohen alludes to the fact that one board seat would not be acceptable to him as he wants the company to actually focus on a shift in mindset. This would require at least two — and probably three or more — new directors to the ten-person board, depending on who is replaced. While it looks like Cohen might have an ally on the board in James Symancyk, the CEO of PetSmart while Cohen was running Chewy, Symancyk also has a brick-and-mortar background and might not see it the same way Cohen does.

If this does end up going to a proxy fight, Cohen seems like the type of shareholder who will take it the distance if necessary. In that case, he would have two potential headwinds. First, the company recently added four new directors through settlements and nominations by shareholders. That could be enough to placate certain institutional shareholders and ISS if they do not see as dire of a situation as Cohen does in this ultra-fast-moving industry. Second, a large part of the shareholder base is comprised of index funds such as BlackRock (12.12%), Vanguard (8.12%) and State Street (4.0%), who are reluctant to back an activist without the cover of an ISS or Glass Lewis recommendation.  However, what is interesting here is there is an unusually high short interest, with approximately 90% of the shares in lending programs, so we don’t really know who has loaned their shares, who can vote them and who can recall them before the meeting.

It will be interesting to see if the board will be able to stomach the change necessary to propel GameStop into the 21st century. In the words of former U.S. Army General Eric Shinseki: “If you don’t like change, you’re going to like irrelevance even less.”

Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments

For the Full Article
Please Continue Reading Here: Former Chewy CEO tries to push GameStop to become the Amazon of the video-game industry

Commentary:
Quite helpful news and links can be found on this complete article.

You May Also Like…

Police warn of scammers claiming to be from Amazon.com  – Amazon News

Police warn of scammers claiming to be from Amazon.com – Amazon News

by: Patrick Ryan Posted: Nov 29, 2020 / 09:59 PM EST / Updated: Nov 29, 2020 / 09:59 PM EST CHEEKTOWAGA, N.Y. (WIVB)– The Cheektowaga Police Department is warning the community about scammers who claim your Amazon.com account is compromised. The department says residents have received scam phone calls claiming to be “Amazon Prime Security.” They say scammers will ask you to purchase gift cards and provide them with the gift card number(s) in exchange for securing your account. Cheektowaga PD wrote in a Facebook post that many people of “all ages” fall victim to the scam each week. As the holiday season gets underway, the department provided the following tips to protect yourself: 1.) TIME IS ON YOUR SIDE – Scammers will try to keep you on the line and pressure you that you need to act fast or there will be consequences. DO NOT RUSH and send money…

Connecticut turning to Amazon for state’s virus PPE needs  – Amazon News

Connecticut turning to Amazon for state’s virus PPE needs – Amazon News

Connecticut officials scrambled to find enough personal protective equipment when the coronavirus pandemic hit last spring, relying on Chinese bankers and a lumber company to help procure masks and gowns.They have used a more familiar tool as coronavirus infections have surged again in recent weeks: Amazon.The Hartford Courant reports Sunday that on one day in early November, the state spent about $134,000 ordering 750,000 exam gloves from the online retail giant.State Chief Operating Officer Josh Geballe told the newspaper that the Amazon purchases were for a specific glove size. “We are actually well above all of our targets in terms of PPE, but for some reason we couldn’t find extra-large gloves so we turned to Amazon,” Geballe said.The newspaper reports that purchase orders from October and November show that the state is stocking up on gloves, with seven different purchases.The state’s largest November order for protective equipment was for $1.86…

Working From Home TV …

Tips to enhance your own website…

14 Best WordPress Testimonial Plugins (Compared) – Website Tips

14 Best WordPress Testimonial Plugins (Compared) – Website Tips

Are you looking for the best testimonial plugins for your WordPress website? Testimonials and reviews are a great way to add social proof to your website and help build trust among your users. In this article, we have hand-picked the best testimonial plugins for WordPress that you can use on your website. Why Use a Testimonial Plugin for WordPress? Using a testimonial plugin lets you easily add customer or client testimonials, reviews, or feedback to your WordPress website. This adds social proof to your site and helps you win new customers and boost sales. You could add testimonials by manually copying them into your posts or pages. However, a testimonials plugin lets you display them attractively in a slider, carousel, grid, and other beautiful layouts. Depending on the plugin you choose, you can show testimonials with photos, a short blurb, reviewer’s name, title, business, or star ratings. That being said,…

How to Add a PayPal Donate Button in WordPress – Website Tips

How to Add a PayPal Donate Button in WordPress – Website Tips

Are you looking to add a PayPal donate button on your WordPress site? PayPal makes it super-easy to accept donations on your website. It is convenient, cost-effective, secure, and already used by millions of users around the world. In this article, we will show you how to easily add a PayPal donate button on your WordPress site. Why Use a PayPal Donate Button in WordPress? Many bloggers add PayPal donate buttons on their WordPress sites to help cover the website’s running costs. Non-profit organizations also use their websites to fundraise for their causes. Paypal donate button provides them an easy way to accept donations. Tip: If you want a more fully-featured fundraising solution, check out these best donation and fundraising plugins for WordPress. Before you start, you will need to create a PayPal account or log in to your existing account. Since this is a comprehensive guide, we have created…

5 Best WooCommerce Spin a Wheel Coupon Plugins (Compared) – Website Tips

5 Best WooCommerce Spin a Wheel Coupon Plugins (Compared) – Website Tips

Are you looking for a spin a wheel coupon plugin for WooCommerce? Spin to win wheel is a gamification technique that helps you generate leads and boost overall sales conversion. In this article, we will share the best WooCommerce spin a wheel coupon plugins that you can use to grow your sales. Why Do You Need a Spin a Wheel Coupon Plugin? The hardest part of running a WooCommerce store is keeping your visitors engaged and converting them into customers. A simple way of doing this is by using a spin a wheel discount popup. It uses gamification techniques by rewarding users when they interact with your discount wheel. For example, when someone enters their email address to spin the wheel, you can offer different incentives such as free shipping, discount coupons, recommend products, and much more. This helps you build loyal customers and increase your sales on your WooCommerce…

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.