One of GameStop’s largest retail investors is asking the company to make significant changes and close stores to turn things around. The plan also includes recommendations for reducing or closing GameStop’s operations in Europe and Australia.
Chewy Inc. Co-founder Ryan Cohen holds a 9.8% stake in GameStop through venture capital firm RC Ventures and is one of the largest investors. Cohen said in a letter that attempts to personally discuss changes with management “have made little progress” and are now contacting the board of directors to stir things up.
In a letter received by The Wall Street Journal, Cohen said GameStop “lacks the ideas, resources, and plans needed to become a dominant sector player.” Cohen called GameStop “urgently pivoting and obviously not wanting to grow with gamers.”
Cohen points out that shareholder value has plummeted in recent years, with GameStop shares still one of the most deficient shares, “a lot about the lack of investor confidence in the current leadership team approach. I’m talking, “he added.
In Cohen’s eyes, GameStop hasn’t caught up with the big changes in games in recent years, including the move from physical hardware to streaming, mobile growth, and changes in buying behavior from “mass retailers.”
According to Cohen, GameStop recorded a decline in revenue and a loss of revenue in the last quarter, which is especially problematic as the industry-wide gaming business is currently growing during a pandemic. doing. GameStop could see sales growth thanks to the launch of the PS5 and Xbox Series X, and the persistent popularity of the Nintendo Switch, but Cohen said, “The temporary surge in sales for the next console cycle , Self-satisfaction and glacier justification. Conversion. “
So what does Cohen want to do to turn things around? He said he was confident that GameStop could evolve its business and become a market leader again. To get there, Cohen told the board that he advised GameStop to close more stores.
“It’s time to identify duplicate poorly performing stores and plan to refrain from renewing leases,” he said.
In terms of its value, GameStop has already closed nearly 400 stores in 2020 alone and plans to close more in the future.
Cohen also said GameStop should consider selling or “rationalizing” its “non-core” businesses in Europe and Australia in order to “reduce losses and potentially generate cash.” .. GameStop owns an EB Games store in Australia.
“The Australian market is showing vibrant signs, but not big or strong enough to offset the losses associated with the company’s hundreds of stores across European countries,” Cohen said.
“When these factors come together, GameStop could please gamers and drive the investment they need to sustain them in the future,” Cohen said. “By taking appropriate steps in 2020 and 2021, GameStop will gain a greater share of the market when estimated industry revenues exceed $ 200 billion annually in 2023.”
GameStop can use some of the cash released from these initiatives to help pay for a variety of other, more profitable initiatives, such as upgrading the company’s e-commerce services. Similarly, this can help “earn more revenue across larger game catalogs, digital content and community experiences, online trade-ins, streaming services, and esports.”
Finally, Cohen said the notice doesn’t provide a rigorous or detailed “turnaround plan” because GameStop’s board of directors and its CEO George Sherman need to do the job. ..
“In this spirit, we quickly provide shareholders with a reliable and publicly available roadmap for cost control, prioritize profitable retail locations and geographic markets, and deserve e-commerce ecosystem gamers. We encourage you to build it, “says Cohen.
Cohen also said he wasn’t asking for a seat on GameStop’s board of directors, closing the note with another jab at the company.
“Please note that RC Ventures is not interested in winning a single seat on GameStop’s 10-member board. A director who has overlooked many years of digital revenue opportunities and presided over massive value destruction. Being an isolated shareholder advocate is unattractive at the meeting, assuming full accountability. ” “We want GameStop leaders to do their job and implement strategies to bring the company into the 21st century.”
A GameStop spokesman told The Wall Street Journal that it aims to make plans that benefit shareholders. A spokeswoman also said he had invited Cohen to the board many times, but declined each time.
Former Nintendo US President Reginald Fiss Aim is on GameStop’s board of directors. Other notable members include James Symancyk, CEO of PetSmart, Raul Fernandez, co-owner of Washington Wizards, and Carrie Teffner, former Executive Vice President of Crocs.