Since Ryan Cohen became Chairman of GameStop (NYSE:GME) in 2021, the company has widely resonated with loyal shareholders. Last year, the video game retail company placed a halt on e-commerce efforts in order to bolster its 4,400 brick-and-mortar stores. As a result, costs related to e-commerce were reduced, and plans to increase e-commerce warehouse storage and service centers were placed on hold.
This resulted in GameStop reporting a profit of $48.2 million during Q4, its first profit in two years. For the full year of 2022, expenses were reduced by more than $100 million. At the same time, revenues fell by 1% to $2.226 billion.
Meanwhile, the move to focus on brick-and-mortar locations contrasts with the prevailing theme of digital sales. Today, many video games are purchased directly online.
GameStop’s focus on physical stores seems to echo Blockbuster’s focus on its stores, which ultimately fell victim to the digitalization of Netflix (NASDAQ:NFLX).
GME Stock: Can a New Brick-and-Mortar Focus Save GameStop?
Last year, global e-commerce sales totaled an estimated $5.7 billion. That figure is expected to grow by 10% to $6.3 trillion this year and $8.1 billion by 2026. One would suspect that GameStop would try to capitalize on this trend, but it seems to be doing the exact opposite. On top of that, GameStop’s entry into digital wallets and non-fungible tokens (NFT), which could be characterized as a form of e-commerce, has fallen flat. The company noted in its Form 10-K: “Revenues earned from our digital asset wallet and NFT marketplace were not material to the consolidated financial statements for fiscal 2022.”
“The mistake he made is he didn’t hire anybody from the gaming industry and he wasted time and money with NFTs,” said Jefferies analyst Andrew Uerkwitz regarding Cohen.
Instead of building standalone e-commerce fulfillment centers, the company has used its brick-and-mortar locations for online fulfillment. At the stores, employees prepare packages to be sent out, and customers can also come to pick up orders. This has reduced costs, but whether this concept is efficient is still up for debate.
For now, all investors can do is wait to see whether the move to focus on brick-and-mortar stores will pay off. Cohen has had success in the past with other companies, although his focus on physical stores seems to be in opposition to growing e-commerce sales.
GME stock is down 3% today but has done pretty well this year so far and is up 30% year-to-date.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
