GameStop Updates Plans Amid Coronavirus, Reopens Few Stores

GameStop Corp. GME recently announced updated plans in response to the COVID-19 impact. The updates include executive pay cuts, furloughs and reopening of certain stores. The company also provided sales data. The gaming retailer said that it has started the process of reopening outlets across Italy, Austria, Germany, and the states of South Carolina and Georgia. After Australia, the company is looking forward to reopening stores in other countries as well. However, its U.S. stores remain shut but two-thirds of such stores are functioning through curbside pick-up.

In addition, the company has decided on a temporary pay cut of 50% for its CEO and 30% for the chief financial officer and rest of its executive leadership team. Also, the board’s cash compensation has been lowered by 50%. Starting Apr 26, the company has decided to temporarily cut pay by 10-30% for some of its employees worldwide. Some of the company’s corporate support staff have been given a choice between going for a furlough or working under a reduced workweek/cut pay program.

GameStop has also cut down on capital spend and lowered inventory receipts. Moreover, it has not paid part of its certain lease payments, and is in discussions with landlords in relation to rent payments, potential abatement and restructuring of future rents during the coronavirus-led closure period. As of Apr 4, it had roughly $772 million in total cash, including $706 million in cash and $66 million available on its revolver.

What Else?

For the nine weeks ending Apr 4, GameStop’s comparable store sales fell 23% year over year, reflecting the impact of store closures through March. For the March period ending on the 21st of the month, comparable U.S. store sales increased roughly 3% on higher demand for products that people require to work or play from home. For the five weeks period in fiscal March, the company’s Australia unit recorded comparable store sales growth of about 64%. Moreover, the stores in the same region have been delivering strong results, with nearly 24% comparable store sales for nine weeks ended Apr 4.

In the wake of the pandemic, curbside pickup has been gaining traction as companies are now resorting to this to curb the spread of the virus. The service has been driving sales, partly making up for the lost sales owing to closed stores. Impressively, GameStop has retained more than 90% of its planned sales across two-thirds of its stores with curbside pick-up facility. Renowned retailers like Best Buy BBY and Sprouts Farmers SFM have also been enhancing their curbside pick-up capabilities. Other retailers like Casey's CASY have been ramping up delivery capabilities in the wake of the crisis.

Coming to GameStop, the Zacks Rank #2 (Buy) stock has gained 3.5% against the industry’s 37.7% decline over the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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