Shareholders of GameStop were optimistic heading into today’s earnings results, with shares sitting just below their year-to-date highs. However, the after-hours news was unexpected, and shares are plummeting. Let’s discuss what happened. 👇
The company’s first-quarter adjusted loss per share of $0.17 on $1.24 billion in revenues. That compared to a $0.52 per share loss and $1.38 billion in revenue a year ago.
Some other stats worth noting include: 📝
- Selling, general, and administrative expenses (SG&A) fell to 27.9% of net sales vs. 32.8% last year
- Cash, cash equivalents, and marketable securities totaled $1.31 billion
- Long-term debt remains limited to one low-interest unsecured loan
The company’s sales declines have slowed to a crawl, and its efforts to reduce costs are helping improve earnings. Despite that progress, the board is clearly unhappy with how quickly the turnaround strategy is taking place.
That leads to today’s most important news, the company has fired CEO Matthew Furlong and appointed Ryan Cohen as executive chairman. 😮
GameStop did not provide a reason for the CEO shakeup, nor did it host an earnings call…simply referring shareholders to its 10-Q filing. Ultimately, that filing stated, “We believe the combination of these efforts to stabilize and optimize our core business and achieve sustained profitability while also focusing on capital allocation under Mr. Cohen’s leadership will further unlock long-term value creation for our stockholders…”
There remains a lot of uncertainty about what all this means. Ryan Cohen’s involvement in GameStop and other “meme stocks” has been controversial due to his mixed success in creating long-term value and unorthodox methods. However, with his investment firm RC Ventures holding an 11.9% stake in the company, he has a vested interest in staging a turnaround.
As for what he’ll be doing day to day? The filing says his responsibilities include capital allocation, evaluating potential investments and acquisitions, and overseeing the managers of GameStop’s holdings. He also made several other leadership changes to manage the other aspects of the role that are less of a priority. 👨💼
Ultimately, the surprise shakeup left some $GME shareholders feeling uneasy. Shares are currently down 20% after hours as investors assess the situation. 🤔
