GameStop is aggressively expanding its warehouse distribution network as the company aims to transform itself into a serious e-commerce retailer. That much is clear.
What’s less clear is what it will do with all that space.
In May, GameStop announced that it had leased a 700,000-square-foot fulfillment center in York, Pa. This month, GameStop announced another lease on 530,000 square feet of space in Reno, Nev.
GameStop’s newly elected board chairman and Chewy Inc. co-founder Ryan Cohen rose to power at the Grapevine-based video game retailer by promising to transform the company into a more powerful online retailer that can compete with the likes of Amazon.
The company has added more than 1 million square feet of space so far, with more likely to come.
In recent announcements, GameStop has been short on details regarding what the centers would be used for besides expediting shipping times to customers on the east and west coasts.
Analysts and investors have been in the dark as to how the remainder of Cohen’s vision will play out. For the time being, GameStop’s leaders have bought a window of opportunity to prove their vision for the company before traders’ interest, analysts have said.
When asked for comment, GameStop pointed to its 2021 proxy statement.
Outgoing CEO George Sherman told shareholders in the April proxy statement that the company is on a path toward becoming a “customer-obsessed technology company that delights gamers.”
Sherman generally outlined four initiatives the company is undertaking, including investing in tech, improving customer care, expanding its distribution footprint and expanding the GameStop product catalog.
“We are continuing the work to expand our addressable market by growing GameStop’s product catalogue. This includes growing our product offerings across gaming, collectibles and other natural adjacencies,” the filing said.
Does the future of GameStop look like a more powerful competitor to consumer electronics retailers like Best Buy? Or something else entirely? Until Cohen and the executive team share their plans, it’s difficult to say.
Still, analysts have noted that underperformance and a lack of communication from GameStop on its plans have hardly affected trading activity. GameStop stock is hovering around $160 a share this week, still up considerably from the $4 it was trading at a year ago.
In Wall Street Bets, an anonymous Reddit community that has loosely organized trading activity to boost GameStop stock to historic highs this year, traders continue to share memes making light of their own disregard for the company’s actual performance and commonly referring to the stock market in general as a “casino.”
For decades, GameStop’s core business has been selling new and used physical video game discs, consoles and accessories. In more recent years, as physical video game sales have been in decline, GameStop branched into other lines of business through acquisitions like video game merchandiser ThinkGeek.
The fact that this basic business model has not dramatically changed in recent years despite declining revenues is at least part of the reason activist investor Cohen captured the attention of so many when he disclosed his 12% stake and ambitious goals for the company in 2020.
Until now, GameStop’s U.S. fulfillment has been managed through two facilities in Grapevine, one of which handles refurbished products, and one in Shepherdsville, Ky. They total just over 1 million square feet of space.
Wedbush Securities analyst Michael Prachter likened the fulfillment center leases to Amazon’s early days, when it was strategically scaling up distribution warehouse space across the country. The company could expand its product offering even further into tangential categories like PC parts, office supplies and other gaming accessories, he said.
Still, Prachter is skeptical that there is a feasible turnaround plan at all.
“I’m curious to hear what his strategy is,” Prachter said.
