Why GameStop’s Pain Won’t Stop

Video-game niche retailer GameStop (NYSE: GME) delivered the news on its holiday quarter Wednesday, and happy, it was not. But worse was its guidance for a loss in the current quarter.

In this segment of the MarketFoolery podcast, senior analyst Emily Flippen tells host Chris Hill what pains her the most about this company's long, ugly decline -- because she feels it was not inevitable. It's just a sad tale, she says, of missed opportunities and a lack of vision.

A full transcript follows the video.

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This video was recorded on April 3, 2019.

Chris Hill: It was a rough fourth quarter for GameStop. Even worse, the video game retailer warned that there's probably going to be a loss in the first quarter, the current quarter that we're in right now. Shares down 5%. I'm looking for a silver lining with GameStop, and I can't find one.

Emily Flippen: I should have told you this before I came on, Chris, but you could not have picked a worst analyst to come on and give commentary about GameStop, because I've had a long and complicated relationship with GameStop.

Hill: Do tell!

Flippen: Well, GameStop has been a terrible investment! But in my opinion, it's a terrible investment because management has always made terrible decisions. For a while, I was a big believer -- and in a sense, still am -- in GameStop's ability to change its business model for the better; to make it something that exists in five or 10 years. That hedged on, GameStop has this amazing refurbishment facility out in Texas. They're the only people really capable of buying, refurbishing, selling games. And they've never really tried to do anything with it. It was always this back-of-their-mind business model.

So, for me, it's a frustrating stock to look at, because at this point, there's really no saving GameStop. It's definitely down and out at this point. I'm not sure if there's a silver lining purely because management -- by the way, they're getting a new CEO in April, but the CEOs turned over a ton -- they just have no vision. They're just sitting there, getting their dividends, wringing out the company for what it's worth, then moving on.

Hill: We've talked on this show before about executive turnover at Tesla. Executive meaning the executive suite. In some ways, that pales in comparison to GameStop. This is going to be their fifth CEO in just over a year. That's going to be so depressing for so many people who work at that company!

Flippen: It's clear that the company has no vision. I joked talking about GameStop earlier today with Aaron Bush. I made the joke that at least Sears and Eddie Lampert, he had a plan.

Hill: [laughs] It was not a great plan!

Flippen: Not a plan to return value to shareholders. But man, did he have a plan to return value to himself, and he did it! And at least there was an underlying goal with that company. With GameStop, it's clear, they're just flailing, and they've been flailing for a long time.

Hill: We'll keep an eye on it.

Chris Hill has no position in any of the stocks mentioned. Emily Flippen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool owns shares of GameStop and has the following options: short April 2019 $13 calls on GameStop. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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