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Retail sales across the US grew about 1 percent in August, a bounce back after spending fell in July. The growth was broad, with 12 out of 13 categories reporting higher sales as families spent more during the back-to-school season.
This is a helpful sign for GameStop as it tries to stabilize its own sales. The company has been leaning heavily on higher-margin collectibles and trading cards to offset the decline in physical video games, and a healthier consumer environment makes that transition easier to manage.
Source: Bloomberg Markets and Finance
GameStop is reopening a select number of stores across the country that it had previously shut down. This move marks a shift in strategy after years of shrinking its physical footprint to cut costs.
The company is leaning into its collectibles business, which includes items like trading cards and apparel, to fill these stores. Since these products earn more profit per dollar than video games, management is betting that a physical presence for collectors can help stop the long slide in total sales. If these stores can reach a break-even point, it protects the company's large cash pile while it looks for new ways to grow.
CEO Ryan Cohen purchased about 20 million dollars of stock this week. This follows smaller purchases by two other directors, James Grube and Lawrence Cheng, who bought roughly 1.2 million dollars combined. When executives buy shares with their own money, it is often seen as a sign of confidence that the stock is worth more than its current price.
This is a significant commitment from the leader of the company. GameStop is currently sitting on over 6 billion dollars in cash, and our view is that the company's value depends on how well management uses that money. Cohen's decision to increase his own stake suggests he is personally aligned with the plan to turn that cash into a more profitable business.
Source: Barrons
Director Alain Attal purchased roughly 100,000 dollars of stock on Thursday. This adds to a string of purchases by other board members and the CEO this week. While smaller than the CEO's 20 million dollar buy, it reinforces the trend of insiders putting their own capital into the company following the latest earnings report.
Director James Grube purchased shares in the open market on Wednesday. This follows a larger $1 million purchase by fellow director Lawrence Cheng earlier in the week.
When board members use their own cash to buy shares, it often signals they believe the stock is priced lower than the business is actually worth. These back-to-back purchases suggest a growing confidence among leadership after the company reported a record quarterly profit.
Management consistently sets a low bar and clears it with small beats every quarter, showing they have a tight grip on costs even as sales shrink.
| Expectation | |
|---|---|
| EPS | $0.37 |
| Revenue | $811M |