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2021-03-25
How can stop
GameStop: Why An Online Pivot Doesn't Work
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{"i18n":{"language":"zh_CN"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":358311873,"tweetId":"358311873","gmtCreate":1616661940392,"gmtModify":1634524683065,"author":{"id":3569481861842889,"idStr":"3569481861842889","authorId":3569481861842889,"authorIdStr":"3569481861842889","name":"Bobjojuki","avatar":"https://static.tigerbbs.com/2cb863319f3eeb17cb904c1be5304979","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":12,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body><p>How can stop</p></body></html>","htmlText":"<html><head></head><body><p>How can stop</p></body></html>","text":"How can stop","highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":2,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/358311873","repostId":1173180418,"repostType":4,"repost":{"id":"1173180418","kind":"news","pubTimestamp":1616660905,"share":"https://www.laohu8.com/m/news/1173180418?lang=&edition=full","pubTime":"2021-03-25 16:28","market":"us","language":"en","title":"GameStop: Why An Online Pivot Doesn't Work","url":"https://stock-news.laohu8.com/highlight/detail?id=1173180418","media":"seekingalpha","summary":"Summary\n\nGameStop Q4 FY2021 earnings give us a clue about the future.\nThe online pivot is happening.","content":"<p><b>Summary</b></p>\n<ul>\n <li>GameStop Q4 FY2021 earnings give us a clue about the future.</li>\n <li>The online pivot is happening. And software isn't everything.</li>\n <li>And yet, there's a problem.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ec2a540c9fcfc31485f01d6add3a0925\" tg-width=\"509\" tg-height=\"339\"><span>Photo by no_limit_pictures/iStock via Getty Images</span></p>\n<p>Tuesday, GameStop (GME) reported itsQ4 FY2020 and FY2020 results. These came in below expectations both on revenues and earnings. However, that’s not the most important take one can draw from this earnings report.</p>\n<p>You see, as a result of my previous article on GameStop, a lot of commenters focused on how GameStop would shift toward an online model. They also focused on how GameStop is much more than just selling games (software). These arguments are put forth against the well-established GameStop bearish thesis, which simply states that over time GameStop will lose nearly all its software sales due to the secular shift toward downloads.</p>\n<p>It's in this context that the just-reported GameStop earnings become useful. This is so because in a single report you can already see that both of the bullish arguments (shift towards online sales, GameStop being much more than software) hold little water. Let’s see.</p>\n<p>Both arguments, that GameStop will shift toward online sales, and that GameStop is much more than software, actually boil down to the same thing. That thing is to say that GameStop isn’t reliant on software to become a successful again, so losing software sales to downloads isn't a huge problem. Both arguments boil down to this, because both are just saying that GameStop can continue selling stuff online - just not software (as by and large that will end up being downloaded).</p>\n<p>So, how did this earnings report address both arguments? It did so by showing the extreme importance of software sales for GameStop. Notice the following:</p>\n<p><img src=\"https://static.tigerbbs.com/06b3fefd670a9bb793fdd834f473c263\" tg-width=\"640\" tg-height=\"450\"></p>\n<p>As you can see, in Q4 FY2020:</p>\n<ul>\n <li>Hardware and accessories grew 21% year-on-year, while Software (the structurally impaired segment) fell by 26% year-on-year. Collectibles fell by 7% year-on-year.</li>\n <li>This evolution was dictated by the new console cycle in the hardware and accessories segment, and by the continuing software sales erosion, as more software is already being downloaded. This led to a significant shift in sales share, with Hardware now representing 54.8% of revenues, versus 34.4% for Software. So, indeed, GameStop isn’t just software.</li>\n</ul>\n<p>With these dynamics, overall revenues fell 3% year-on-year, which wasn’t dramatic even if it fell short of expectations. Of course, overall revenues were also helped by the extreme +175% year-on-year gain in online sales.</p>\n<p>It would seem from the above that indeed there's some kind of shift going on at GameStop. This shift is toward hardware and online sales, though granted helped by the COVID-19 epidemic and the new console generation.</p>\n<p>So, what’s the problem? The problem is simple and stated by GameStop itself (bold highlights are mine):</p>\n<blockquote>\n Gross margin was 21.1%, a decline of 610 basis points compared to the fiscal 2019 fourth quarter, reflecting an\n <b>expected mix shift toward lower margin console sales</b>in response to the launch of generation nine consoles,\n <b>increased freight and credit card fees associated with the shift to E-Commerce sales</b>, and a broader promotional stance;\n</blockquote>\n<p>Therein lies the problem:</p>\n<ul>\n <li>Software is so much higher margin than hardware, that a shift towards hardware creates a huge hit to profitability.</li>\n <li>Moreover, the online business itself is also lower margin, which drives yet another hit to profitability.</li>\n</ul>\n<p>I should further say that Q4 FY2020 adjusted earnings didn’t really show the magnitude of the deterioration this trend brought about. Why? Because:</p>\n<ul>\n <li>Q4 FY2020 adjusted earnings per share of $1.34 were actually up 5.5% from Q4 FY2019. However, this was all due to a very large one-off tax credit ($1.03), which GameStop, like many other companies, kept in its adjusted earnings.</li>\n <li>In truth, Q4 FY2020 adjusted operating earnings were down a massive 74% year-on-year. Q4 FY2020 EBITDA was also down 63% year-on-year. This is terrible performance, especially as it already benefited from the new console cycle benefit.</li>\n</ul>\n<p>These incredible drops in profitability, brought about by the shift into online sales and out of software, are very relevant. They drove yearly adjusted EBITDA to a $149.4 million loss. Not only does this EBITDA loss indicate significant cash burning potential, but the continuing shift in business model will make it worse still, over time.</p>\n<p><b>Not Everything Was Bad</b></p>\n<p>I should also say that not everything about the report was bad. The report also referenced significant revenue acceleration in February (bold highlight is mine):</p>\n<blockquote>\n “We are off to a strong start in 2021 as\n <b>February comparable store sales increased 23%</b>, led by continued strength in global hardware sales. As we look ahead, we are excited by the opportunities that are in front of us as we begin prioritizing long-term digital and E-Commerce initiatives while continuing to execute on our core business during this emerging console cycle. Our emphasis in 2021 will be on improving our E-Commerce and customer experience, increasing our speed of delivery, providing superior customer service and expanding our catalogue,” Sherman concluded.\n</blockquote>\n<p>A 23% increase in same-store sales should be more or less enough to drive a 13% increase in total revenues. Thus, the new console cycle still has the potential to drive revenue growth during FY2021.</p>\n<p>Additionally, store traffic brought about by the new consoles will likely also pick up a few new generation games, thus also helping the more profitable software sales in the short-term.</p>\n<p><b>Conclusion</b></p>\n<p>Q4 FY20 gave us a lot of information regarding how GameStop will look in the future. A shift toward online retailing and away from software will tend to produce lower margins and lower profitability in general, even with visible revenue growth.</p>\n<p>Maybe the market won’t mind. It doesn’t seem to mind with Chewy (CHWY). But still, for a fundamental investor the profitability outlook isn’t pretty.</p>\n<p>At the same time, short-term, propelled by the new console generation, things don’t look bad (revenue growth-wise) for the next three quarters.</p>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>GameStop: Why An Online Pivot Doesn't Work</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nGameStop: Why An Online Pivot Doesn't Work\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-03-25 16:28 GMT+8 <a href=https://seekingalpha.com/article/4415911-gamestop-why-online-pivot-doesn-t-work><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nGameStop Q4 FY2021 earnings give us a clue about the future.\nThe online pivot is happening. And software isn't everything.\nAnd yet, there's a problem.\n\nPhoto by no_limit_pictures/iStock via ...</p>\n\n<a href=\"https://seekingalpha.com/article/4415911-gamestop-why-online-pivot-doesn-t-work\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GME":"游戏驿站"},"source_url":"https://seekingalpha.com/article/4415911-gamestop-why-online-pivot-doesn-t-work","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173180418","content_text":"Summary\n\nGameStop Q4 FY2021 earnings give us a clue about the future.\nThe online pivot is happening. And software isn't everything.\nAnd yet, there's a problem.\n\nPhoto by no_limit_pictures/iStock via Getty Images\nTuesday, GameStop (GME) reported itsQ4 FY2020 and FY2020 results. These came in below expectations both on revenues and earnings. However, that’s not the most important take one can draw from this earnings report.\nYou see, as a result of my previous article on GameStop, a lot of commenters focused on how GameStop would shift toward an online model. They also focused on how GameStop is much more than just selling games (software). These arguments are put forth against the well-established GameStop bearish thesis, which simply states that over time GameStop will lose nearly all its software sales due to the secular shift toward downloads.\nIt's in this context that the just-reported GameStop earnings become useful. This is so because in a single report you can already see that both of the bullish arguments (shift towards online sales, GameStop being much more than software) hold little water. Let’s see.\nBoth arguments, that GameStop will shift toward online sales, and that GameStop is much more than software, actually boil down to the same thing. That thing is to say that GameStop isn’t reliant on software to become a successful again, so losing software sales to downloads isn't a huge problem. Both arguments boil down to this, because both are just saying that GameStop can continue selling stuff online - just not software (as by and large that will end up being downloaded).\nSo, how did this earnings report address both arguments? It did so by showing the extreme importance of software sales for GameStop. Notice the following:\n\nAs you can see, in Q4 FY2020:\n\nHardware and accessories grew 21% year-on-year, while Software (the structurally impaired segment) fell by 26% year-on-year. Collectibles fell by 7% year-on-year.\nThis evolution was dictated by the new console cycle in the hardware and accessories segment, and by the continuing software sales erosion, as more software is already being downloaded. This led to a significant shift in sales share, with Hardware now representing 54.8% of revenues, versus 34.4% for Software. So, indeed, GameStop isn’t just software.\n\nWith these dynamics, overall revenues fell 3% year-on-year, which wasn’t dramatic even if it fell short of expectations. Of course, overall revenues were also helped by the extreme +175% year-on-year gain in online sales.\nIt would seem from the above that indeed there's some kind of shift going on at GameStop. This shift is toward hardware and online sales, though granted helped by the COVID-19 epidemic and the new console generation.\nSo, what’s the problem? The problem is simple and stated by GameStop itself (bold highlights are mine):\n\n Gross margin was 21.1%, a decline of 610 basis points compared to the fiscal 2019 fourth quarter, reflecting an\n expected mix shift toward lower margin console salesin response to the launch of generation nine consoles,\n increased freight and credit card fees associated with the shift to E-Commerce sales, and a broader promotional stance;\n\nTherein lies the problem:\n\nSoftware is so much higher margin than hardware, that a shift towards hardware creates a huge hit to profitability.\nMoreover, the online business itself is also lower margin, which drives yet another hit to profitability.\n\nI should further say that Q4 FY2020 adjusted earnings didn’t really show the magnitude of the deterioration this trend brought about. Why? Because:\n\nQ4 FY2020 adjusted earnings per share of $1.34 were actually up 5.5% from Q4 FY2019. However, this was all due to a very large one-off tax credit ($1.03), which GameStop, like many other companies, kept in its adjusted earnings.\nIn truth, Q4 FY2020 adjusted operating earnings were down a massive 74% year-on-year. Q4 FY2020 EBITDA was also down 63% year-on-year. This is terrible performance, especially as it already benefited from the new console cycle benefit.\n\nThese incredible drops in profitability, brought about by the shift into online sales and out of software, are very relevant. They drove yearly adjusted EBITDA to a $149.4 million loss. Not only does this EBITDA loss indicate significant cash burning potential, but the continuing shift in business model will make it worse still, over time.\nNot Everything Was Bad\nI should also say that not everything about the report was bad. The report also referenced significant revenue acceleration in February (bold highlight is mine):\n\n “We are off to a strong start in 2021 as\n February comparable store sales increased 23%, led by continued strength in global hardware sales. As we look ahead, we are excited by the opportunities that are in front of us as we begin prioritizing long-term digital and E-Commerce initiatives while continuing to execute on our core business during this emerging console cycle. Our emphasis in 2021 will be on improving our E-Commerce and customer experience, increasing our speed of delivery, providing superior customer service and expanding our catalogue,” Sherman concluded.\n\nA 23% increase in same-store sales should be more or less enough to drive a 13% increase in total revenues. Thus, the new console cycle still has the potential to drive revenue growth during FY2021.\nAdditionally, store traffic brought about by the new consoles will likely also pick up a few new generation games, thus also helping the more profitable software sales in the short-term.\nConclusion\nQ4 FY20 gave us a lot of information regarding how GameStop will look in the future. A shift toward online retailing and away from software will tend to produce lower margins and lower profitability in general, even with visible revenue growth.\nMaybe the market won’t mind. It doesn’t seem to mind with Chewy (CHWY). But still, for a fundamental investor the profitability outlook isn’t pretty.\nAt the same time, short-term, propelled by the new console generation, things don’t look bad (revenue growth-wise) for the next three quarters.","news_type":1},"isVote":1,"tweetType":1,"viewCount":300,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":10,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/358311873"}
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