GameStop CCO Resigns Ahead Of Q4 Earnings Report

GameStop Corp. GME shares traded lower by 2.2% after the company announced its latest management shuffle ahead of a highly anticipated fourth-quarter earnings report on Tuesday afternoon.

What Happened? On Tuesday morning, GameStop announced Chief Customer Officer Frank Hamlin will be leaving the company.

Why It’s Important: GameStop’s brick-and-mortar video game retail business has been in decline for years, with trailing 12-month revenue down 21.1% in the five years ending 2019. The pandemic slammed GameStop and other retailers in 2020, and the company reported a 30.1% revenue drop in the third quarter.

Despite the business headwinds, GameStop shares have skyrocketed in 2021 as the company has become the poster child of Reddit’s WallStreetBets “meme” stock craze. Serious long-term investors are hoping Chewy Inc CHWY co-founder Ryan Cohen, who joined the GameStop board in January, will help the company transition away from its outdated retail strategy to a more modern online approach.

GameStop previously announced the departure of Chief Financial Officer Jim Bell in February.

Related Link: GameStop Is Losing Its 'Stimmy' Support, Analyst Says

Cohen’s strategy is reportedly to turn GameStop into the “Chewy of Gaming." For now, his focus is on cutting prices, improving selection and increasing delivery times, according to Reuters.

Despite the company’s struggles, the meme stock trading phenomenon has sent GameStop’s stock soaring about 870% since it last reported quarterly earnings back in December.

Analysts are expecting GameStop to report fourth-quarter adjusted EPS of $1.35 on revenue of $2.21 billion, 0.8% growth compared to a year ago. Analysts are also extremely skeptical of GameStop’s Reddit-fueled stock price rise. The average price target among the seven analysts who cover the stock is $13, suggesting 93.1% downside from current levels.

Benzinga’s Take: GameStop’s legacy brick-and-mortar business has been declining for years, so the company must come through with some clarity and details related to its turnaround strategy at some point to support the bull thesis. In the meantime, GameStop shares could remain under pressure in the coming weeks as the flood of retail traders using their government stimulus payments to buy the stock starts to die down.