GameStop Corp. (NYSE: GME) (the “Company”) today announced that it
has filed a detailed investor presentation titled “Driving Value
for All Stockholders,” highlighting GameStop’s significant recent
refreshment of the Board and management, as well as leadership’s
successful progress on executing the business transformation plan
“GameStop Reboot.” The information provided in the
presentation supports the Board’s contention that its slate of
experienced director nominees are better qualified than the two
candidates nominated by Hestia Capital Partners, LP and Permit
Capital Enterprise Fund, LP’s (“Hestia Capital” and “Permit
Capital,” or collectively, the “Dissident Stockholders”) to guide
GameStop through its turnaround and deliver returns to all
stockholders.
GameStop’s Board urges stockholders to use the
BLUE proxy card to vote “FOR ALL”
of GameStop’s 10 highly qualified director nominees in connection
with the Company’s upcoming Annual Meeting of Stockholders (the
“Annual Meeting”) to be held at 8:00 a.m. CT on June 12, 2020.
The full investor presentation, as well as
previous communications to stockholders, can be found on the Events
& Presentations section of the Company’s Investor Relations
website, here:
Highlights from the presentation include:
- GameStop Possesses a Highly Qualified and Recently
Refreshed Board and Management Team
- GameStop’s Board directly solicited stockholder feedback in its
efforts to refresh the Board: when engaging with stockholders
representing 87% of our outstanding shares as of April 20, 2020,
including the Dissident Stockholders, the Board received
encouragement for GameStop’s Board refreshment, corporate strategy,
capital allocation and corporate governance initiatives
- Within the last two years, GameStop has added six new
independent directors – including two directors added under a
cooperation agreement with Hestia-Permit – and comprehensively
enhanced the Company’s corporate governance practices
- On GameStop’s newly refreshed Board, which features 9 out of 10
independent directors, 7 directors have joined in the last 19
months
- The directors targeted by the Dissident Stockholders, Messrs.
Thomas Kelly and Jerome L. Davis, have announced their intention to
continue to serve as Board members to steward the transition of the
new directors in direct response to stockholder feedback requesting
an orderly transfer of institutional knowledge, before retiring in
June 2021
- The Board thoughtfully refreshed the Company’s leadership team
in 2019, intentionally recruiting executives, including Chief
Executive Officer George Sherman, with extensive experience working
with large retailers that have undergone successful business
transformations
- The Right Team is Executing on “GameStop Reboot” and
Delivering Returns
- The Board undertook an extensive review of strategic
alternatives and sold non-core assets prior to recruiting
GameStop’s highly qualified new management team, enabling GameStop
to capitalize on its position as the industry-leading omni-channel
gaming platform
- GameStop’s Board and management team have implemented and begun
to execute on “GameStop Reboot,” the Company’s progressive business
transformation plan:
- In fiscal 2019, generated $62.3 million in adjusted operating
income* while exiting the year with approximately $500 million in
cash, despite a challenging sales environment underpinned by the
late-stage gaming console cycle
- Significantly improved capital structure, deploying proceeds
from the sale of non-core business units to reduce debt by $401
million and repurchase 38.1 million shares for $199 million to
leverage the Company’s market position as the omni-channel leader
in gaming
- Optimized operations by improving inventory, with a 31%
reduction at year-end; implementing initiatives to accelerate
GameStop’s transformation, including enhancing digital, online and
experiential retail; improving our loyalty program; and continuing
to de-densify the store base
- Began fiscal 2020 with increased financial flexibility and a
continued focus on key priorities to optimize, stabilize and
transform GameStop to achieve sustainable and profitable long-term
growth
- Due to the Board’s prudent capital allocation and recent
strengthening of the Company’s balance sheet, the Company is
well-positioned to navigate the market challenges arising from the
outbreak of the COVID-19 pandemic to protect and enhance
stockholder value* See below for a definition of adjusted operating
income, a non-GAAP financial measure used in this release, a
reconciliation of this non-GAAP financial measure to its
most directly comparable GAAP financial measure, and information
about how our management team uses such non-GAAP measure
and why our management believes such non-GAAP financial
measure provides useful information to investors.
- The Dissident Stockholders’ Nominees Add No Value to
GameStop’s Board
- In contrast to GameStop’s directors, who possess strong
financial, operational, retail, video game, and omni-channel
experience, among other relevant skills, the Dissident Stockholders
have nominated two candidates who do not possess the qualifications
necessary to complement GameStop’s Board or execute the Company’s
ongoing transformation plan
- Messrs. Kurtis Wolf and Paul Evans (a portfolio manager and
financial executive, respectively) both lack public company
management experience and necessary expertise in the retail, video
game and omni-channel industries
- Mr. Wolf’s poor understanding of what it takes to operate a
business and deliver long-term value to stockholders is evident in
the Dissident Stockholders’ activism campaign in 2019 driven by
Hestia Capital’s short-sighted share buyback recommendation, which
would have hampered GameStop’s ability to navigate the COVID-19
pandemic and destroyed stockholder value
- Hestia Capital and Permit Capital persist in their self-serving
attempts to appoint these nominees to the Board, despite the
Board’s good faith attempts to avoid a proxy fight, as Mr. Wolf has
rejected any settlement offer that does not include a Board seat
for himself
As the presentation outlines in greater detail,
GameStop currently benefits from a newly refreshed Board that
possesses extensive industry-specific experience and relevant
skillsets, with the majority of directors added since April 2019.
Not only did this Board recruit a new management team, including
CEO George Sherman, but it is actively overseeing the management’s
business transformation plan and strongly believes that continued
execution of “GameStop Reboot” will drive substantial value for
stockholders.
Election of Hestia Capital and Permit Capital’s
poorly qualified nominees, by contrast, would remove two highly
qualified and experienced directors from GameStop’s thoroughly
refreshed and capable Board who have agreed to serve one more year
as GameStop’s directors to oversee the smooth transition of the
newer directors at the request of our stockholders, and impair the
Company’s ability to continue executing on GameStop’s
transformation plan and generate value for our stockholders.
The Choice is
Clear - Please VOTE on the BLUE Proxy Card
GAMESTOP’S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR ALL” OF THE
BOARD’S 10 NOMINEES USING THE BLUE PROXY CARD.
The Board urges stockholders to not
return or otherwise vote any White proxy card sent by the
Dissident Stockholders.
The Board believes that GameStop’s highly
qualified and experienced slate is best positioned to oversee the
continued successful execution of GameStop’s Reboot plan and
deliver substantial value to ALL of GameStop’s
stockholders.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements are based upon management’s
current beliefs, views, estimates and expectations, including as to
the Company’s industry, business strategy, goals and expectations
concerning its market position, future operations, margins,
profitability, capital expenditures, liquidity and capital
resources and other financial and operating information, including
expectations as to future operating profit improvement. Such
statements include without limitation those about the Company’s
expectations for fiscal 2020, future financial and operating
results, projections, expectations and other statements that are
not historical facts. All statements regarding targeted and
expected benefits of our transformation, the GameStop Reboot plan,
capital allocation, profit improvement and cost-savings
initiatives, and expected fiscal 2020 results, are forward-looking
statements. Forward-looking statements are subject to
significant risks and uncertainties and actual developments,
business decisions and results may differ materially from those
reflected or described in the forward-looking statements. The
following factors, among others, could cause actual results to
differ materially from those reflected or described in the
forward-looking statements: the uncertain impact, effects and
results of pursuit of operating, strategic, financial and
structural initiatives, including the GameStop Reboot strategic
plan; volatility in capital and credit markets, including changes
that reduce availability, and increase costs, of capital and
credit; the impact of the COVID-19 outbreak on capital markets and
our business; our inability to obtain sufficient quantities of
product to meet consumer demand, including due to supply chain
disruptions on account of trade restrictions, political
instability, COVID-19, labor disturbances and product recalls; the
timing of release and consumer demand for new and pre-owned
products; our ability to continue to expand, and successfully open
and operate new stores for our collectibles business; risks
associated with achievement of anticipated financial and operating
results from acquisitions; our ability to sustain and grow our
console digital video game sales; our ability to establish and
profitably maintain the appropriate mix of digital and physical
presence in the markets we serve; our ability to assess and
implement technologies in support of our omnichannel capabilities;
the impact of goodwill and intangible asset impairments; cost
reduction initiatives, including store closing costs; risks related
to changes in, and our continued retention of, executives and other
key personnel and our ability to attract and retain qualified
employees in all areas of the organization; changes in consumer
preferences and economic conditions; increased operating costs,
including wages; disruptions to our information technology systems
including but not limited to security breaches of systems
protecting consumer and employee information or other types of
cybercrimes or cybersecurity attacks; risks associated with
international operations; increased competition and changing
technology in the video game industry; changes in domestic or
foreign laws and regulations that reduce consumer demand for, or
increase prices of, our products or otherwise adversely affect our
business; our effective tax rate and the factors affecting our
effective tax rate, including changes in international, federal or
state tax, trade and other laws and regulations; the costs and
outcomes of legal proceedings and tax audits; our use of proceeds
from the sale of our Spring Mobile business; and unexpected changes
in the assumptions underlying our outlook for fiscal 2020.
Additional factors that could cause our results to differ
materially from those reflected or described in the forward-looking
statements can be found in GameStop's Annual Report on Form 10-K
for the fiscal year ended February 1, 2020 (the “10-K”) filed with
the SEC and available at the SEC's Internet site at
http://www.sec.gov or http://investor.GameStop.com. Forward-looking
statements contained in this press release speak only as of the
date of this release. The Company undertakes no obligation to
publicly update any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as may
be required by any applicable securities laws.
Additional Information
On April 28, 2020, the Company filed a
definitive proxy statement on Schedule 14A and form of
associated BLUE proxy card with the SEC
in connection with its solicitation of proxies for its 2020 Annual
Meeting of Stockholders (the “Annual Meeting”). The definitive
proxy statement is also being mailed to the Company’s stockholders
beginning on or about April 28, 2020. INVESTORS
AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) AND ACCOMPANYING BLUE PROXY CARD AS THEY CONTAIN IMPORTANT
INFORMATION. Investors and security
holders may obtain free copies of the proxy statement (including
any amendments or supplements thereto) and other documents filed
with the SEC through the website maintained by the SEC
at www.sec.gov. Copies will also be available at no charge in
the “Investor Relations” section of the Company’s
website, http://news.gamestop.com/home.
Participants in the
Solicitation
The directors, executive officers and certain
other members of management and employees of the Company may be
deemed “participants” in the solicitation of proxies from
stockholders in connection with the matters to be considered at the
Annual Meeting. Information regarding the persons who may, under
the rules of the SEC, be considered participants in the
solicitation of the Company’s stockholders in connection with the
Annual Meeting can be found in the definitive proxy statement filed
on April 28, 2020 and the 10-K, each of which is available at the
SEC's Internet site at http://www.sec.gov or
http://investor.GameStop.com.
Media Contact:Phil Denning, ICR Inc. (646)
677-1258 Phil.Denning@icrinc.com
Investor Contact:GameStop Corp. Investor
Relations (817) 424-2001 investorrelations@gamestop.com
If you have questions about how to vote your
shares or need additional copies of the proxy materials, please
call the firm assisting us with the solicitation of proxies:
INNISFREE M&A INCORPORATED Stockholders may
call:1(877) 750-9501 (toll-free from the U.S. and Canada),
or +1(412) 232-3651 (from other
countries) IMPORTANT NOTE: Please simply discard
any White proxy cards sent to you by Hestia Capital Partners LP. If
you have already voted using a White proxy card, you can change
your vote by using the enclosed BLUE proxy card to vote by
telephone, Internet or by mail. Only your latest-dated vote will
count.
About GameStop
GameStop Corp., a Fortune 500 company
headquartered in Grapevine, Texas, is the world’s largest video
game retailer, operates approximately 5,500 stores across 14
countries, and offers the best selection of new and pre-owned video
gaming consoles, accessories and video game titles, in both
physical and digital formats. GameStop also offers fans a
wide variety of POP! vinyl figures, collectibles, board games and
more. Through GameStop’s unique buy-sell-trade program, gamers can
trade in video game consoles, games, and accessories, as well as
consumer electronics for cash or in-store credit. The
company's consumer product network also includes www.gamestop.com
and Game Informer® magazine, the world's leading print and digital
video game publication. General information about GameStop Corp.
can be obtained at the Company’s corporate website. Follow
@GameStop and @GameStopCorp on Twitter and find GameStop on
Facebook at www.facebook.com/GameStop.
Non-GAAP Reconciliation
As a supplement to our financial results
presented in accordance with U.S. generally accepted accounting
principles (GAAP), we may use certain non-GAAP measures,
such as adjusted operating income. We believe
these non-GAAP financial measures provide useful
information to investors in evaluating our core operating
performance. The following table reconciles the Company’s adjusted
operating income to its nearest GAAP measure (in millions):
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Fiscal Year |
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2019 |
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2018 |
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Adjusted Operating
Income |
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Operating earnings (loss) |
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$ |
(399.6 |
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$ |
(702.0 |
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Transformation costs |
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37.9 |
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— |
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Business divestitures |
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10.8 |
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— |
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Goodwill impairments |
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363.9 |
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970.7 |
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Property, equipment and other asset impairments |
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19.4 |
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2.1 |
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Intangible impairments |
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2.3 |
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43.1 |
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Severance and other |
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27.6 |
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17.4 |
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Adjusted operating income |
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$ |
62.3 |
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$ |
331.3 |
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The GameStop Board Recommends
StockholdersVote on the BLUE Proxy Card,
via the internet or telephone or by mail by promptly Signing and
Dating the enclosed BLUE Proxy Card and Returning
it in the enclosed postage-paid envelope
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