🎮 GameStop drops the numbers

Wednesday, March 24, 2021 by Robinhood Snacks | Disclosures

Big Tech reading the "new vocabulary"

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Hey Snackers,

It's been a painful week for the nation. In the past week, the US has seen at least seven shootings. Police have taken custody of the suspect in Monday's Colorado grocery store shooting, which left 10 people dead.

Markets ticked down yesterday as Covid cases in Europe continued rising: Germany, France, and Italy have all extended their lockdowns.

GME
1. GameStop's moment of truth: the first earnings report since January’s big stock pop

Ready gamer one... GameStop just dropped its first earnings report since its big stock pop. ICYMI (unlikely): from December to late January, GameStop shares surged 1,000%. Since their January 27th all-time high, shares have fallen 48% — but are still up nearly 2,000% over the past six months. Without further ado.... here are the numbers for the three months ended January 30:

  • -3%: GameStop's quarterly sales dipped 3% from 2019 to $2.1B — slightly lower than Wall Street estimates.
  • ~4X: Profit nearly quadrupled to $81M, but that was mostly thanks to a $70M tax benefit. And it was still much less than analysts expected.
  • +175%: The brightest spot in GameStop's earnings was ecommerce sales, which nearly 3X'd in the quarter and made up a third of total sales.

Less "Blockbuster of video games"... more "Amazon of video games." That's the strategy GameStop is going for in 2021. In 2020, it closed ~700 of its 5K stores. Now, it’s leaning on new leaders to change course:

  • In January, GameStop added former Chewy CEO Ryan Cohen (and two of his Chewy pals) to its board. Some investors hope the Chewy ecommerce experts can make GameStop less mall-retailer, more digital shop.
  • In February, GameStop appointed Matt Francis, a former Amazon Web Services engineering leader, as its first-ever chief technology officer in charge of ecommerce and tech.
THE TAKEAWAY

The past can inform the future... Flashback to the glory days: from August 2009 to October 2010, GameStop pulled in nearly ~$6B in sales and $170M in profit. For fiscal year 2020: GameStop pulled in ~$5B in sales and lost more than ~$215M. Its ecommerce numbers from last quarter are encouraging. But it remains to be seen whether GameStop’s new leaders can restore its financials to glory day status – and to what extent investors will act on those fundamentals.

FTC

If the government did a "40 under 40" list... Lina Khan would probably be on it. President Biden just nominated the 32-year-old Columbia law school professor to be one of five commissioners at the Federal Trade Commission. If appointed, she would be the youngest FTC commissioner in history. FTC = the US govt agency that enforces anti-monopoly laws and promotes consumer protection.

  • Antitrust scholar: In 2017, Khan graduated from Yale Law School, where she published a paper called “Amazon’s Antitrust Paradox." It went viral, becoming the most-read law article.
  • Tech critic: Khan has been a vocal critic of Big Tech power, calling for a wider interpretation of antitrust law and potential harm to consumers.

Antitrust could get a lot more "anti"... Khan has said that we need "a new vocabulary" for addressing Big Tech's dominance. That could mean championing to expand the scope of antitrust law. She's part of a new movement, sometimes referred to as "Hipster Antitrust" (lol).

  • Hipster Antitrust argues that US law focuses so much on short-term price benefits to consumers, that it fails to protect competition.
  • For example: Khan's viral paper argues that while Amazon can benefit consumers by aggressively lowering prices, its power to price out competitors could hurt consumers by reducing options and innovation.
THE TAKEAWAY

Big Tech could have big(ger) problems... There have been many hearings and lawsuits on Big Tech's power over the past few years — but not many consequences. If appointed, Khan would vote on important antitrust and consumer protection decisions. Possibly including: whether to block acquisitions by large companies like Google, break up Instagram and Facebook, or ban Apple from offering its own apps on the App Store. It could take years for major changes to happen, but Khan's appointment poses a fresh challenge for tech cos.

What else we’re Snackin’
  • First: Evanston, Illinois, becomes the first US city to offer reparations to Black residents for past discrimination and the lingering effects of slavery.
  • MicDrop: Microsoft is reportedly in talks to buy chat platform Discord in a deal that could top $10B.
  • NFTweet: Twitter CEO Jack Dorsey sells an NFT of his first tweet for $2.9M, saying the money will go to charity.
  • Cryptout: Coinbase's valuation soars to $68B ahead of the crypto exchange's public listing on the Nasdaq.
  • Tele: Telehealth startup Ro raises $500M to expand its virtual and in-home care platform.
  • Vax: US healthcare officials are raising concerns over AstraZeneca's latest vax data (it might be out-of-date).
Snacks Daily Podcast

GoPuff just raised $1.2B at a $9B valuation... to keep bringing the bodega to your door.

Tune in to hear why it's still the "naughtiest" of delivery companies.

Wednesday

Authors of this Snacks own shares of: Google, Apple, Amazon, and Microsoft

ID: 1576384