Logo of retailer Software, Etc. on a 5.25" floppy disk
branded by the company
Charles Babbage's (1984–1994)
GameStop traces its roots to Babbage's, a Tucson, Arizona-based software retailer founded in 1984 by former Harvard Business School classmates James McCurry and Gary M. Kusin. The company was named after Charles Babbage and opened its first store in Dallas's North Park Center with the help of Ross Perot, an early investor in the company. The company quickly began to focus on video game sales for the then-dominant Atari 2600. Babbage's began selling Nintendo games in 1987. The company went public in 1988. By 1991, video games accounted for two-thirds of Babbage's sales.
NeoStar Retail Group (1994–1996)
Babbage's merged with Software Etc., an Edina, Minnesota-based retailer that specialized in personal computing software, to create NeoStar Retail Group in 1994. The merger was structured as a stock swap, where shareholders of Babbage's and Software Etc. received shares of NeoStar, a newly formed holding company. Babbage's and Software Etc. continued to operate as independent subsidiaries of NeoStar and retained their respective senior management teams. Babbage's founder and chairman James McCurry became chairman of NeoStar, while Babbage's president Gary Kusin and Software Etc. president Daniel DeMatteo retained their respective titles. Software Etc. chairman Leonard Riggio became chairman of NeoStar's executive committee.
Gary Kusin resigned as president of Babbage's in February 1995 to start a cosmetics company. Daniel DeMatteo, formerly president of Software Etc., assumed Kusin's duties and was promoted to president and chief operating officer of NeoStar. NeoStar chairman James McCurry was also appointed to the newly created position of NeoStar CEO. The company relocated from its headquarters in Dallas to Grapevine later that year.
NeoStar merged its Babbage's and Software Etc. units into a single organization in May 1996 amid declining sales. Company president Daniel DeMatteo also resigned, and NeoStar chairman and CEO James McCurry assumed the title of president. In September of that year, after NeoStar was unable to secure the credit necessary to purchase inventory necessary for the holiday season, the company filed for Chapter 11 bankruptcy. With the filing, NeoStar board member Thomas G. Plaskett became chairman and James McCurry remained company chief executive and president.
The leadership changes were not enough and in November 1996 the assets of NeoStar were purchased for $58.5 million by Leonard Riggio, a founder of Software Etc. and chairman and principal stockholder of Barnes & Noble. Electronics Boutique had also bid to purchase NeoStar, but the judge presiding over NeoStar's bankruptcy accepted Riggio's bid because it kept open 108 stores more than Electronics Boutique's bid would have. Approximately 200 retail stores were not included in the transaction and were subsequently closed.
Babbage’s Etc. (1996–1999)
Following his purchase of NeoStar's assets, Leonard Riggio dissolved the holding company and created a new holding company named Babbage's Etc. He appointed Richard "Dick" Fontaine, previously Software Etc.'s chief executive during its expansion in the late 1980s and early 1990s, as Babbage Etc.'s chief executive. Daniel DeMatteo, previously the president of both Software Etc. and NeoStar, became company president and COO. Three years later, in 1999, Babbage's Etc. launched its GameStop brand with 30 stores located in strip malls. The company also launched gamestop.com, a website that allowed consumers to purchase video games online. GameStop.com was promoted in Babbage's and Software Etc. stores.
Barnes & Noble Booksellers (1999–2004)
Barnes & Noble Booksellers purchased Babbage's Etc. in October 1999 for $215 million. Because Babbage's Etc. was principally owned by Leonard Riggio, who was also Barnes & Noble's chairman and principal shareholder, a special committee of independent directors of Barnes & Noble Booksellers evaluated and signed-off on the deal. A few months later, in May 2000, Barnes & Noble acquired Funco, an Eden Prairie, Minnesota-based video game retailer, for $160 million. Babbage's Etc., which had been previously operating as a direct subsidiary of Barnes & Noble, became a wholly owned subsidiary of Funco. With its acquisition of Funco, Barnes & Noble also acquired Game Informer, a video game magazine that was first published in 1991. Funco was renamed GameStop, Inc. in December 2000 in anticipation of holding an initial public offering for the company.
Barnes & Noble Booksellers took GameStop public with a February 2002 initial public offering on the New York Stock Exchange. GameStop was listed under the ticker symbol GME. Barnes & Noble retained control over the newly public company with 67% of outstanding shares and 95% of voting shares. Barnes & Noble retained control over GameStop until October 2004, when it distributed its 59% stake in GameStop to stakeholders of Barnes & Noble, making it an independent company.
GameStop's successful years (2004–2016)
GameStop acquired EB Games (formerly Electronics Boutique) in 2005 for $1.44 billion. The acquisition expanded GameStop's operations into Europe, Canada, Australia, and New Zealand. Two years later, in 2007, GameStop acquired Rhino Video Games from Blockbuster for an undisclosed amount. Rhino Video Games operated 70 video game stores throughout the Southeastern United States.
GameStop purchased Free Record Shop's Norwegian stores in April 2008. The company acquired 49 stores and converted them into video game shops. Daniel DeMatteo replaced Richard Fontaine as GameStop CEO in August 2008. DeMatteo had served as company COO since 1996. Fontaine, who had been GameStop chairman and CEO since 1996, remained the company's chairman. J. Paul Raines, formerly executive vice president of Home Depot, became company COO in September. GameStop acquired Micromania, a French video-game retailer, in October 2008 for $700 million. GameStop, which had previously owned no stores in France, now had 332 French video-game stores. It also acquired a majority stake in Jolt Online Gaming, an Irish browser-based game studio, in November 2009. Jolt closed in 2012.
J. Paul Raines became GameStop CEO in June 2010. He replaced Daniel DeMatteo who was named executive chairman of the company. While serving as CEO in 2012, GameStop's digital revenue grew from $190 million in 2011 to more than $600 million in 2012.
GameStop acquired Kongregate, a San Francisco, California-based website for browser-based games; terms of the deal were not disclosed.
GameStop acquired Spawn Labs and Impulse in separate transactions during 2011. Spawn Labs was a developer of technology that allowed users to play video games that were run remotely on machines in data centers rather than their personal computer or console. Impulse was a digital distribution and multiplayer gaming platform. GameStop closed Spawn Labs in 2014.
GameStop purchased BuyMyTronics, a Denver, Colorado-based online market place for consumer electronics, in 2012. Later that year, it acquired a minority interest in Simply Mac, a Utah-based authorized Apple reseller. GameStop acquired the remaining 50.1% interest in Simply Mac in November 2013. GameStop also acquired Spring Mobile, a Salt Lake City, Utah-based retailer of AT&T-branded wireless services, in November 2013. They obtained 163 RadioShack locations as of February 26, 2015, as well. All GameStop stores have been closed down in Puerto Rico at the end of March 2016, citing increased rates of government taxes. On August 3, 2016, it acquired 507 AT&T store chains in plans to diversify into new businesses and less dependent on the video game market.
Changes in market conditions
The market for physical game media has been in a state of decline since online services such as Xbox Live, PlayStation Network, Nintendo eShop, and Steam have taken foothold, and GameStop, whose business was long rooted in new and pre-owned software, has begun feeling the effects of the changing market. In 2017, GameStop reported a 16.4% drop in sales for the 2016 holiday season, but expressed optimism in its non-physical gaming businesses. Reasons cited for the decline in sales included industry weakness, promotional pricing pressure, lower and in-store traffic.
Shares of GameStop stock fell 16% throughout 2016. On February 28, 2017, shares dropped an additional 8% following Microsoft's announcement of its Xbox Game Pass service. Following these reports, GameStop announced it would close over 150 stores in 2017 and expand its nongaming business. On the same day, however, GameStop said it planned to open 65 new Technology Brand stores and 35 Collectibles stores due to a 44% and 28% increase in sales, respectively. GameStop expects a continued drop in operating income between 3% and 10% in 2017.
In late June 2018, GameStop confirmed talks of a possible sale, with Sycamore Partners, a private equity firm in New York, the most likely buyer, with a target deal expected by February 2019. However, on January 29, 2019, GameStop reported it had stopped looking for a buyer for the company, due to a "lack of available financing on terms that would be commercially acceptable to a prospective acquirer", and was looking for other actions to help re-establish its financial ground. Shares dropped 27% to a 14-year low immediately following this announcement.
The financial results for 2018 showed the biggest loss in GameStop company history. For the 52 week period ending on February 2, 2019, GameStop reported a record-breaking net loss of $673 million. This was a change from the net profit of $34.7 million in the previous year. The net sales for fiscal year 2018 were down year-on-year to $8.29 billion, a decrease of 3 percent.
Paul Raines notified GameStop of his resignation on January 31, 2018. Raines had been on medical leave since November 2017. He had a medical reoccurrence of a brain tumor, and later died on March 4, 2018. DeMatteo, GameStop's executive chairman stepped in as interim chief executive officer. On February 6, 2018 the company announced Michael K. Mauler as the new CEO and new member of the board of directors. On May 11, 2018, Mauler resigned due to "personal reasons" and chairman Dan DeMatteo was named interim CEO. Mauler did not take any severance package or separation benefits. On May 31, 2018, GameStop named Shane Kim as interim CEO. Kim was replaced by George Sherman in March 2019.
In July 2019, GameStop partnered with an outside design firm, R/GA, to put forth plans to revamp stores to focus on competitive gaming and retrogaming, and to introduce new ways for customers to try games before buying them. Each concept store is expected to be mutually exclusive.
A leaked email revealed on July 31, 2019 indicated that 50 employees, including district and regional managers, would be laid off as a result of reorganization efforts. Later, in August 2019, GameStop laid off over 120 positions, including about half of the staff of Game Informer as part of their "GameStop Reboot initiative to transform our business for the future and improve our financial performance".
In August 2019, Michael Burry's investment firm Scion Asset Management sent a letter to GameStop urging the company to engage in a portion of stock buybacks. The letter also revealed that Scion currently owns approximately 2,750,000 shares, or about 3.05% of GME. GME, which has been in steady decline in share price since late January 2019, saw a spike of roughly 20% after Burry revealed that he's going long on the stock in an interview with Barrons. In the interview, Burry explained that both Sony and Microsoft will enter the next console generation with a physical disc drive and therefore likely extend the longevity of GameStop. He also noted that the company's balance sheet was in good condition.
After reporting that it has missed analysts' expectations during their 2nd quarter of fiscal year 2019 ending August 2019, as reported in September 2019, Gamestop announced that it plans close about 180-200 underperforming stores of the 5,700 it had worldwide in short term, along with developing metrics to evaluate other potential closures over the next two years.