Billionaire GameStop Investor Calls For Big Changes, Including More Store Closures

An investor who owns a 10% stake in GameStop is calling on the company to create a plan to turn things around.

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One of retailer GameStop's biggest private investors has called on the company to make significant changes, and close stores, to help turn things around. The plan also includes a recommendation to scale down or close GameStop's businesses in Europe and Australia.

Through his venture capital firm RC Ventures, Chewy Inc. co-founder Ryan Cohen holds a 9.8 percent stake in GameStop's shares, making him one of the biggest investors. Cohen said in a letter that his attempts to discuss changes with management privately "yielded little progress," he's now reaching out to the board of directors to try to stir things up.

In the letter obtained by The Wall Street Journal, Cohen said GameStop "lacks the mindset, resources, and plan needed to become a dominant sector player." Cohen called out GameStop for its "apparent unwillingness to pivot with urgency and grow with gamers."

Stockholder value has plummeted in recent years, Cohen pointed out, adding that GameStop's stock remains one of the most shorted stocks out there, "which speaks volumes about investors' lack of confidence in the current leadership team's approach."

In Cohen's eyes, GameStop has also failed to keep up with major changes in gaming in recent years, including the transition from physical hardware to streaming, the growth in mobile, and a change in buying behavior away from "mass retailers."

GameStop has posted revenue declines and income losses in recent quarters, Cohen said, pointing out that this is particularly a problem because the gaming business across the industry is experiencing growth currently during the pandemic. GameStop may see an uptick in sales coming up thanks to the launch of the PS5 and Xbox Series X, and the enduring popularity of the Nintendo Switch, but Cohen said, "the next console cycle's temporary sales bump is not a justification for complacency and glacial transformation."

So what does Cohen want to do to turn things around? He said he's confident that GameStop can evolve its business and become a market-leader again. To get there, Cohen said to the board that he advises that GameStop should close more stores.

"Now is the time to identify duplicative, underperforming stores and plan to forgo lease renewals," he said.

For what it's worth, GameStop has already closed nearly 400 stores in 2020 alone, and more closures are planned for the future.

Cohen also said GameStop should look to sell or "streamline" the company's "non-core" operations in Europe and Australia to "reduce losses and potentially generate cash." GameStop owns the EB Games stores in Australia.

"While the Australian market has shown signs of life, it is not nearly big or strong enough to offset the losses linked to the Company's hundreds of stores across European nations," Cohen said.

"Taken together, these factors can fuel the necessary investments that GameStop could be making to delight and retain gamers well into the future," Cohen said. "Taking the right steps in 2020 and 2021 can enable GameStop to own a bigger share of the market when estimated industry sales explode to more than $200 billion per year in 2023."

GameStop can use some of the freed up cash from these initiatives to help pay for various other, more profitable endeavors like upgrading the company's e-commerce offerings. In turn, this could help "provide for greater revenue capture across larger gaming catalogs, digital content and community experiences, online trade-ins, streaming services, and esports."

In closing, Cohen said he hasn't supplied a strict or detailed "turnaround plan" in this notice because that job should be done by GameStop's board of directors and the company's CEO, George Sherman.

"In this spirit, we urge you to quickly 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 gamers deserve," Cohen said.

Cohen also said he is not seeking a seat on GameStop's board of directors, and he concluded his note with one further jab at the company.

"Please be advised that RC Ventures is not interested in receiving a lone seat on GameStop's ten-member Board. It is not enticing to become an isolated stockholder advocate on a Board that has overlooked years of digital revenue opportunities and presided over massive value destruction without assuming full accountability," he said. "We want GameStop’s leaders to do their jobs and implement a strategy for bringing the Company into the 21st century."

A spokesperson for GameStop told The Wall Street Journal that it has a goal of creating plan to benefit shareholders. The spokesperson also noted that it has invited Cohen to join the board of directors multiple times, but he turned it down every time.

Former Nintendo of America president Reggie Fils-Aime sits on the GameStop board of directors. Other notable members include PetSmart CEO James Symancyk, Washington Wizards co-owner Raul Fernandez, and former Crocs executive vice president Carrie Teffner.

Got a news tip or want to contact us directly? Email news@gamespot.com

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Avatar image for OdinXivraj
OdinXivraj

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I hate Gamestop with a passion. I also hate the idea of employees losing their jobs. However if I may play devils advocate more store closures is a good thing in a business sense. One of Gamestops many many problems is that is cannibalizing itself. I live in a very town myself and there is a section of town with three Gamestops on the same block. That's not counting the other two one the side of town. All this in a semi-rural area with a median age of about 40.

There is simply not enough business to go around.

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Lordcrabfood

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Gamestp/EB is great when they have sales, plus you can pick up some hard to find games fairly cheap. It will be a shame when they inevitably disappear, it is always fun having a look around in thier stores.

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dragoonmike

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a rich person complaining gamestop is not making enough money for him = fake news.

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mediastupid1

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Edited By mediastupid1

close them all!

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Avatar image for chubby170
Chubby170

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@mediastupid1: Its like the only place to buy used games. Do you like paying full price?

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Thanatos2k

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@chubby170: Ebay exists.

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Barighm

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Edited By Barighm

@chubby170: I buy used games online all the time, often for much lower prices, and in much better condition, than I would find at GS.

For example, I got EDF5 for half off a week after release. Said the game was used but it looks nearly brand new to me. Got a brand new copy of Trials of Mana for just $20...because there's a crack in the corner of the case. No problem with everything else inside, and I'll just replace it with a new case from one of those shovelware games you see at dollar stores (although you rarely see PS4 games there. Lots of Xbox games though).

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mediastupid1

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@chubby170: I choose to buy my games not from gamestop and haven't for many years.

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dvdjedi

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@mediastupid1: Less competition is NEVER a good thing for consumers. But you be you, I guess.

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mediastupid1

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@dvdjedi: sure I agree but a company that treats their employees like trash and constantly rips people off doesn't get my business and hasn't since the early 2000s.

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kstaggs87

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GameStop will not make it out of this decade. Mark my words.

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WarGreymon77

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It turns out, scummy business practices aren't all that profitable.

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dragoonmike

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@WarGreymon77: unless you ea

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Ice12Tray

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The corporate stooges at GameStop are insane. When they bought ThinkGeek they could have turned stores into a whimsical place to shop and had some pro consumer polices so people want to come and and the employees want to work there. Instead they gave store managers no control over their inventory, cut hours to the bone and threatened employees jobs if they didn’t meet a quota on sales and made them be pushy to customers. All while their archaic computer system slows everything down and breaks constantly.

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jenovaschilld

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I greatly love going into a gamestop and browsing through games, the physical boxes and gaming peripherals in 3D, never gets old. I still love and prefer physical over digital content. But on that, Gamestop is 2 decades past its prime, if not for record growth world wide of the gaming industry, there would be no way Gamestop could exist. Like a Radio Shack, Blockbuster, or a Babys R Us these jobs that are so important to the American fabric have died off to allow new competition to thrive. As much as we would like to keep the horse and buggy, the high tech profession of coopers, or the lighthouse -time moves on and I am sure somewhere sweet Egyptian Pyramids jobs moved on.

I hope this billionaire remembers the many employees, when they start closing stores and restructure. Allowing them a soft landing into new careers.

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Avatar image for WarGreymon77
WarGreymon77

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@jenovaschilld: I enjoyed Electronics Boutique and Babbages. Gamestop, however, turned buying a video game into a very unpleasant experience.

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Crazy_sahara

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If it wasn't for them I'd not net a Xbox series X on November 10 for 264 bucks,.

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quinnd6

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Edited By quinnd6

You have billionaires that know nothing about pricing games overpricing games, charging 70-80 euros for new releases, getting them to try sell so called collectibles and junk that no-one will buy and offering worktime as a prize to their employees for getting them to dance like monkeys. It doesn't take a genius to know that these idiots at the top who know nothing about videogames or what price they should be at are screwing up the company and running it into the ground.

Why not get somebody who knows something about videogames and can make it at least in some way competitive with other video game stores run it instead of these a-hole knobheads that run it.

Closing all the stores is going to finish GameStop all together not save them.

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Thanatos2k

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He just wants to strip the dying company. There is nothing they can do to become a "market-leader" because their business itself is declining due to digital and there's nothing they can do about it.

The fun thing is Gamestop itself has driven so many to digital because they would rather buy online than go into a Gamestop and subject themselves to the Gamestop buying experience.

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lionheartssj1

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@Thanatos2k: I dunno, I've had a friendly relationship with my local GS manager for probably more than a decade now. I've never had an issue with the shopping experience. My biggest gripe with GS has been the lag in market reaction. Every now and then there will be an old game that is inexplicably expensive. On the other hand, I've scored some really good deals with their used promos.

Plus, I've voiced my opposition to digital only on this site many times, so I do buy a fair amount of used games at GS.

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Avatar image for Jinzo_111887
Jinzo_111887

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@Thanatos2k: What's funny is that they wanted to get into the used digital game market at one point in time, but something seems to have stopped that plan.

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jinzo9988

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@Thanatos2k: Gamestop isn't completely to blame for that. Convenience is king and there's no fighting that no matter how good you are. Of course, they've not helped themselves in that regard... you can make a case for going out of your way to go to a Gamestop if there's some sort of incentive to do so. Whether it's getting a good deal on something, or you simply enjoy the company there. Corporate's done a really good job of turning people away with all the stupid shit they've mandated to their employees over the years.

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Thanatos2k

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@jinzo9988: Gamespot had one advantage over ordering online - speed. If I order from Amazon (or even Gamespot online) it takes several days for them to ship the game assuming you don't pay even more for fast shipping. But while it is certainly more convenient for the game to be delivered to your door, you could get the game faster by going in person to a store.

But Gamespot wasn't a store that sold games, they sold preorders. Over and over throughout the years I would go into a Gamespot on the Wednesday after games came out on Tuesdays, only to be told they had no copies because I didn't preorder.

As a result, I stopped going there.

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CashPrizes

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I'm just happy they survived until now, my Cyberpunk collectors edition pre-order is through them because it was sold out everywhere else!

They can go belly up for all I care. They are only marginally better at their jobs then the game counter at Target or Best Buy, only those stores don't force their employees to pressure you to reserve and pre-order everything or sign up for crap.

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Barighm

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Edited By Barighm

This is what an investor who made a bad investment and is desperately trying to recoup the losses sounds like. Should have shorted traditional non-major retailers years ago, buddy. It was obvious the moment XBL/PSN became a thing that the big publishers would start trying to push out the middle man.

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santinegrete

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Poor mr billionare wants to keeps it's ridiculous income ridiculously high at the cost of more job loss. There goes priorities :(

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tisezoda

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@santinegrete: While it is pretty crappy, at the end of the day it is a business. The point of a business is to make money. That is the bottom line. If it was being run efficiently and productively then its employes would, hopefully in a perfect world, also benefit. But in all honesty it is a dying practice (Brick and Mortar) so it should not come as a surprise for those people, the real people doing the work, that its not a viable long term thing for them.

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Izraal

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@tisezoda:

Your statements are accurate, but mischaracterize what the purpose of business "is" to stockholders vs what the actual purpose of business "should be," from a big picture ethical standpoint. The only ethical defense of big business, regardless of industry, is that it creates jobs. Therefore the only ethically defensible rationalization for big business' existence is job creation. Business needs to exist to create jobs, first and foremost. Profit generation is not for the stockholders' benefit (from a big picture ethical standpoint) but for the purpose of creating more jobs, therefore all profit needs to be driven into creating more jobs, not rewarding investors for the magic combination of guessing correctly and being wealthy to begin with.

Shifting to this mindset, if a business is considering a model that destroys jobs in order to maximize profit in order to survive, it has no right to survive as its failing at the only ethically reasonable role for a business to exist - to create jobs. A business existing and profiting has no inherent merit for the world. A business creating jobs does.

If you're not creating jobs, then just get out. Gamestop isn't providing food, medicine, or education to the underprivileged. It's selling video games. The only ethical merit by which we can judge Gamestop or any for-profit company that does not contribute to the public good is by how many people it employs, and how it treats its employees. We know full well it treats its employees poorly, and wants to employ less of them. That is where Gamestop is failing. Profitability is meaningless in a big picture concern - the business literally has no ethical grounds to justify its ongoing existence.

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