GameStop’s No Good Very Bad Week
As the new coronavirus continues to ravage the global economy, many companies are under siege and scrambling to stay afloat among historic downturn. Whether it is restaurants battling government-mandated closings or small businesses struggling to decide whether or not they can pay their employees if they are sick, no one is free of the effects of this devastating virus. The last thing anyone wants to fight on top of COVID-19 is a public relations nightmare, and yet that is exactly what GameStop has forced itself to do.
In the five days since Monday, March 16th, GameStop has seen their stocks trend towards penny stock territory, one of their conference calls was leaked online, and they have been widely mocked and disparaged for claiming that they are “essential retail” which must stay open during the pandemic. GameStop was already widely penned as the next business to slowly shut down due to changing economic forces in the market, similar to the way Blockbuster slowly wound down over the course of a decade following the rise of Netflix and other streaming sources. The last thing they needed on top of the stresses of a global pandemic and a looming recession was to damage their credibility.
Here is what happened in what is undoubtedly one of the worst possible weeks for the beleaguered company.
Monday, March 16th
On Monday, GameStop’s stock finished the day at $4.39 a share. Their stock price had largely stayed flat during the historic selloff. People working from home and being laid off could help to improve the sale of games and gaming devices if people were forced to entertain themselves indoors for weeks or months to come. There were rumblings about businesses closing, but so far, the malls were still open, and GameStop was plowing ahead as well as they could.
Then, Kotaku, a large gaming news site, reported that GameStop employees were worried about the company’s internal policies in regards to their response to the coronavirus pandemic. While the company released a positive message to its investors and customers about their response to the disease, the employees in the stores were getting worried.
Hand sanitizer, a rapidly dwindling commodity, was on back order company-wide, and a few people had chimed in to say that their restrooms were running out of toilet paper. GameStop’s do not usually carry tons of cleaning supplies and do not employ janitorial staff, so when the meager supplies they had on hand were gone, they were gone. This left store managers without proper sanitation and disinfectant in their retail spaces. The reporting says that upper-level management told the store-level employees to find their own sanitation supplies for their stores. This left the employees scratching their hands, and questions begin to be asked about the company’s priorities and readiness in regards to the crisis.
Tuesday, March 17th
As Tuesday morning dawned, the story first reported by Kotaku on Monday night gets picked up by more outlets, including Polygon, bringing attention to GameStop’s response to the coronavirus. Employees begin speaking out in larger numbers about GameStop’s upper management’s blase attitude towards the disease and their employees’ safety. As these stories are gaining steam the morning of March 17th, GameStop had not canceled any of their regularly scheduled events, which included two midnight game launches that were scheduled to happen later that week.
Midnight launches have historically been big sales events for GameStop retail locations, which encourages prospective gamers to come out at midnight to grab their favorite games the minute they are released to the public. Some midnight events can attract dozens or even hundreds of people. While no one expected the midnight releases slated for the week to be as big as past ones, the thought of people showing up in any numbers to retail locations across the country without proper cleaning supplies understandably caused a lot of managers anxiety. As the rest of the world was slowly shutting down, GameStop appeared to be moving full steam ahead.
By the end of the day on Tuesday, facing both internal and growing external pressure, the company decides to cancel their midnight launch events but are emphatic that they will be staying open and that games can still be picked up during normal business hours. Employees were instructed to regularly use hand sanitizer and to clean all surfaces, but that cleaning supplies would not be available through normal channels for “several weeks.”
San Fransisco orders a citywide “shelter in place” order, which foreshadows bigger things to come.
Wednesday, March 18th
As these stories begin circulating through the gaming community and beyond, GameStop sees its stock price drop by almost a dollar. Wednesday sees their stock open immediately lower and continue to fall throughout the day. Tuesday’s stock closed at $4.23 a share, and Wednesday saw a low of $3.56 a share.
Stories continue to run about GameStop’s initial response to the crisis. Stores are still open, but some have begun to trim hours. Overall, the situation begins to stabilize. GameStop appears committed to remaining open, but so are a lot of other businesses so they plan to plod ahead. Their stock price recovers somewhat and ends the day at $3.78 a share.
Thursday, March 19th
Thursday sees a confluence of forces converge on GameStop all at once. First, California Governor Gavin Newsom orders a halt to all non-essential activities and orders Californians to stay home indefinitely. This order essentially forces the closure of all businesses deemed non-essential to shutter until ordered otherwise. Businesses considered essential are grocery stores, pharmacies, and ancillary businesses that keep the supply chains moving. That would include auto repair, gas, and some hotels. Truck drivers need to stay on the road, vehicles need to keep moving, and the grocery stores need to continue to feed the people as they hunker down.
As a result of the announcements of the closing of non-essential business in California and pundits saying that this could be the first state of many that could issue similar orders, GameStop announces that they consider themselves to be essential retail and that they will remain open in defiance of orders saying otherwise.
Not only do they make this statement, which is immediately jumped on as misguided or outright wrong, they then encourage their staff to defy the lockdown personally by interacting with police and other government officials.
“We have received reports of local authorities visiting stores in an attempt to enforce closure despite our classification. Store Managers are approved to provide the document linked below to law enforcement as needed.” — Memo obtained by Kotaku
They double down, claiming that their self-designated status as “essential retail” allows their floor staff to try and flout government orders by confronting officials that may come to shut them down. That means that the higher-ups at GameStop know that they are not essential retail because police are not going into the grocery stores to enforce the shutdowns. They are trying to conscript their employees to be front line soldiers in the fight to keep GameStop’s revenue strong in the midst of a crisis, despite the legality or safety of such actions.
The incredulity of their customers and staff continues to grow and other, non-gaming outlets begin to pick up on the insanity that is brewing at GameStop. The NASDAQ runs a story reporting on GameStop’s claims and links to the original sources whose tones are getting sharper as the week goes on. Feeling the heat growing, GameStop decides to put out a public statement on their Twitter.
Posted to GameStop’s Twitter account on March 19th
The memo states all of the things that have already been publicly stated in an attempt to reassure their customers, investors, and the public that they are taking the crisis seriously. However, it does not address the claims that the stores do not have the proper sanitation supplies or that store employees have been encouraged to physically confront state officials that are coming into their stores. It looks rushed and does nothing to stop the growing flow of negative press that is coming their way.
But it gets worse.
Thursday also sees YouTuber CAMELOT331 obtain and release audio from an alleged GameStop conference call. The audio and provided commentary is not flattering. It features concerned employees calling in and asking questions about their current policies and in return, getting a parade of non-answers from the people at corporate. It becomes apparent that people who work in the corporate offices are working from home after they said that the phones are off and that they are only responding to their employees via email. When asked if they can suspend trade-ins due to the elevated threat of handling objects from unknown people’s homes during a health crisis, they say no, normal trade-in rules apply. They are told they won’t be paid if they take time off for self-isolation or quarantine. They tell the managers that it is their duty to encourage and comfort their employees who are scared, not corporate’s.
Another big concern raised by the GameStop managers is the company’s continued attempts to drive physical traffic to their stores. They are still encouraging people to come in to buy their games, and they have not halted trade-ins. They have announced they are releasing a game a day early, Doom Eternal, in an attempt to lower the potential crowds in their stores, but to many, this does not seem like enough.
Unsurprisingly, the idea of having a crowd of people anywhere, much less in traditionally cramped and small GameStop stores, is highly concerning to people in the time of a public health crisis due to an infectious pandemic but the corporate entities on the audio simply say that the employees cannot control the number of people that come into their stores. This highlights the issue that is beginning to anger the public, which is that their corporate offices have the power to limit the number of people in the stores by simply closing the stores.
I cannot verify the authenticity of the audio, but it sounds legitimate, and at this point, in the week, the bad press only continues to weigh on GameStop during this trying time.
Almost immediately, other YouTubers in the gaming community pick up on the story and begin to harrow GameStop.
ACG, a channel with over 600k subscribers, released a statement lambasting the company reading in part:
I urge you to never ever buy from gamestop [sic] again. I want to make it clear right now. I have an unrelenting, unstoppable hatred for them now, and I will make sure its never ever forgotten even if I have to post it in every single video for the rest of my life.
Two other large channels, each with around 400k subscribers each, say that GameStop is endangering their employees and that they have lost it.
As if it can’t get any worse, Thursday also sees Westfield Malls and Simon Properties, two of the country’s largest mall operators, both say that they will be shutting down all of their properties for at least a week. Many of GameStop’s stores are located within malls operated by these two mall giants, and even if they wanted to try and fight closures by the state, they can’t fight forced closures by their landlord.
Friday, March 20th
By Friday morning, it becomes clear that GameStop has lost the room. The stories about their claims that they are an essential business, the leaked conference call, and the general backlash are circulating in full force. The negative press is growing so bad that their stock was downgraded to a neutral stock, and their target price was slashed almost in half from $8 to $4.25.
In the face of such strong headwinds, usually, companies take a deep breath and draw up a damage control plan, but instead, GameStop doubled down.
In a statement to EW, the company unbelievably defends their decisions during this whole fiasco writing in part:
While GameStop is best known as a provider of gaming and home entertainment systems, we also offer a wide array of products and devices that are important to facilitate remote work, distance learning, and virtual connectivity. As millions of Americans face unprecedented challenges adapting to virtual learning, working, and interaction, there is a significant need for technology solutions, and we are one of many providers of these products that are remaining open at this time. Schools, businesses, and families are now suddenly dependent on being able to connect through technology.
Even though everyone knows that they are not essential retail and their policies up until this point have been completely dragged online, they have come out swinging and doubling down on their self-declared position as essential during the pandemic. The entirety of the statement can be read via EW here.
Friday also saw New York, another massive state, follow California’s lead and ban all non-essential business in the state until further notice. Whether GameStop is going to continue to tell their employees to act as though they are essential retail or if their employees are going to stay home in light of the increasing bans on business activity around the country is yet to be seen.
Looking Forward
At the time of writing, this GameStop’s stock is still below $4/share, and they were already closing hundreds of stores towards the end of 2019. It is hard to blame companies for trying to keep their revenue afloat during this trying time, but doing so at the expense of the safety of your employees, your customers, and your reputation seems exceedingly foolish. GameStop was already a company pegged for a potential looming bankruptcy or general folding by many analysts, and making questionable decisions during a time of crisis is not going to help their outlook going forward.
Stock prices were already weak, stores were already closing, and a partial redesign had GameStop scrambling for an identity in an age of digital downloads, fierce competition in the electronics space, and the decline of the mall. 2020 was shaping up to be a promising year for the game industry with the teasing of the next generation of consoles coming out this year and the standard slate of AAA games scheduled to hit the markets, GameStop could have tried to have a good year but acting like this and garnering so much negative press during a crisis is going to hurt their prospects going forward on top of everything else.
Whether you believe GameStop’s claims that they are an essential business or not, the consensus seems to be that GameStop was ill-prepared for this crisis, that they moved slowly and have been making increasingly erratic decisions as it progresses. Public sentiment is changing in light of the company’s response, but most damning of all was the response by their employees. The fact that their employees felt unsafe, unprotected, and driven to act in ways that they did not feel comfortable with looks terrible, and the response has been for them to leak internal memos and audio to the public in order for them to be heard.
GameStop’s Twitter continues to put out reassuring messages to the public in between standard ads and promotions. GameStop has not committed to closing their stores and continues to double down on their claim that they can remain open during government-mandated shutdowns of other businesses.
No matter which way you parse it, on top of the global crisis that is already gripping everyone and everything, GameStop had a no good, very bad week, and the majority of it was of their own making.
Please listen to all state guidelines and official orders during this time. Read up and listen to the CDC guidelines and all of the breaking news regarding the evolving situation regarding the COVID-19 pandemic. All businesses would love to stay open, but that is simply not reality. The only way we all get through this is together.
