Why It Doesn’t Matter Who GameStop’s CEO Is

By Douglas A. McIntyre Updated Jan 11, 11:44PM EST · Published May 12, 8:05AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Why It Doesn’t Matter Who GameStop’s CEO Is — © Thinkstock

Retailer GameStop Corp. (NYSE: GME) lost its chief executive officer. He had been in the job three months. Although the move caused consternation among investors, the CEO selection does not mean much. GameStop is in a downward spiral from which it cannot recover.

Michael K. Mauler did not enjoy a “first hundred days” honeymoon. He was gone yesterday and replaced on an interim basis by founder and Executive Chair Daniel A. DeMatteo. Presumably, DeMatteo’s pedigree is good enough to be the CEO, as he had been in the past. That begs the question of why Mauler was CEO at all. DeMatteo did say:

Given my tenure and familiarity with the company and our associates, it’s a natural step for me to assume this role and guide the business at this time while the board searches for a permanent CEO.

That makes the permanence, or lack or permanence, in the role even more confusing.

[nativounit]

The answer to both DeMatteo’s reasons for keeping away from the CEO job and Mauler’s departure is that, as a brick-and-mortar retailer, GameStop cannot be fixed. Investors certainly believe that. GameStop shares are down 31% this year, 55% in the past two years and 68% in the past five. At $12.71 a share, the stock trades just above its 52-week low.

It would be hard to find a retailer with more exposure to the trouble with retail than GameStop. It operates over 7,200 stores across 14 countries.

GameStop’s fourth-quarter numbers were good, but its digital sales and guidance for 2018 were abysmal. In the final quarter of last year, revenue rose 15% to $3.5 billion. Same-store sales were up 12.2%. However, the company lost $106 million, compared to net income of $209 million last year. Digital sales were poor, up 7.3% to just $61.4 million. That is barely 2% of the total.

In terms of guidance:

Total Sales -2.0% to -6.0%

Comparable Store Sales (excludes Tech Brands stores) Flat to -5%

Income Tax Rate 26.0% to 27.0%

Adjusted (Non-GAAP) Earnings Per Share (diluted) $3.00 to $3.35*

Capital Expenditures $110.0 million to $120.0 million

The company has no articulated strategy to raise is digital sales rapidly.

GameStop looks very much like J.C. Penney and Barnes & Noble. Each company is in a different part of the retail business, but Wall Street has walked away from them because they have store sales that overwhelm online.

It doesn’t matter long-term who the GameStop CEO is. Almost no one believes the company can be repaired.

[recirclink id=462035]

[wallst_email_signup]

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.