FREDERIC J. BROWN/AFP/Getty Images
Ryan Cohen
‘s shake-up of the
board is nearly complete. Now the pressure is on to deliver what would be a historic turnaround.
(ticker: GME) said Thursday its board of director intends to elect Cohen, who co-founded pet e-commerce firm
(CHWY) and holds a 13% GameStop stake, as chairman following its annual meeting in June.
The company also nominated six individuals for election to its board. The group includes two newcomers: Larry Cheng and
Yang Xu.
Cheng co-founded Volition Capital, which was the first institutional investor in Chewy. Xu is senior vice president of global finance and treasury at Kraft Heinz. Cohen, GameStop CEO
George Sherman,
and former Chewy executives
Alan Attal
and
Jim Grube
round out the company’s nominees.
Kurt Wolf, managing member and chief investment officer of the activist investor Hestia Capital Management, resigned from the board on Monday, according to a filing with the Securities and Exchange Commission.
The company also said that following its annual meeting on June 9, all directors will be compensated in equity alone, and that pay for individual board members will be cut by about 28%.
CFRA analyst Camilla Yanushevsky wrote in a note to clients Thursday that the news that Cohen is set to become chairman isn’t much of a surprise to her. She maintained a Sell rating on the stock with a target of $16 for the price. That is far below the current level of near $177.
She noted that during the company’s latest fiscal year, ended Jan. 30, it was the only constituent of its peer group to post lower comparable-store sales, “despite a steroid of stimulus and a favorable backdrop of remote work and study, which encourages at-home activities like gaming.”
“We hold concerns over ability to maintain competitive positioning due to high dependence on brick-and-mortar and consumers’ shift away from physical to digital,” she wrote.
Of course, while the pandemic gave people more time at home to play videogames, it also made downloading them, rather than visiting stores, more appealing. Online sales made via gaming consoles cut GameStop out of the picture. GameStop’s e-commerce sales were up 175% year over year, but accounted for about 34% of net sales in the fiscal fourth quarter.
At the same time, more optimistic observers say, the company historically has seen a decline in sales during the year before companies such as
launch new videogame consoles. New consoles from Sony and
hit the market in November.
Still, analysts fear the shift to downloading games, which accelerated last year, could be permanent.
Cohen has been the wild card for GameStop since he announced a stake toward the end of last summer. His background and connections have inspired hope, but turning around retail companies is tricky. GameStop will need to win back customers who have moved on to more convenient options.
Recent executive hires with e-commerce and customer-care backgrounds are a positive step toward addressing that, and a part of Cohen’s plan to make GameStop an e-commerce platform that “excites and delights customers.” Attracting talent had been a challenge for GameStop in past years. The company aims to differentiate itself from the pack through fast shipping, expanded offerings, and strong customer service.
GameStop stock opened higher at $185.88, but that was its peak for the morning. Shortly before the close in New York, the stock was down 4.4% to $170.10.
While that is significantly higher than the mean target for the stock price among analysts, at $45.42, according to FactSet, GameStop stock often trades on nonfundamental factors like short selling interest, online chatter, and speculative options activity.
Write to Connor Smith at connor.smith@barrons.com
