This is my first ever "DD", been lurking and invested since the very end of January, so smacked right in the face by the trading halt. I took some time compiling all kinds of news and filings, educating myself on how GameStop will transform itself. I will be posting that information soon, as well. This is a compilation of information I have found freely available on the internet and by no means is it financial advice whatsoever. Keep eating those crayons, I especially like red ones. (English is not my mother tongue so bear with me everyone.

I have linked to the Gamestop page, so feel free to read the entire statement yourself. But here is a slightly shortened version. Maybe someone has the time and knowledge to bring some insights to the previous earnings reports, as to inventory changes, debt financing, lease changes etc. I bet someone in this forum knows how to read financial statements. With that being said, let's jump right in.

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Q4 Results Outlook, March 23rd 2021

(Source: https://news.gamestop.com/news-releases/news-release-details/gamestop-reports-2020-holiday-sales-results)

Fiscal Fourth Quarter 2020 Outlook (13 weeks ending January 30, 2021)

The Company continues to focus on efforts that position it to manage through this unprecedented time, including maintaining its balance sheet strength, prioritizing the allocation of resources to areas of the business that produce strong cash flow, reducing expenses across the business, developing and expanding its digital strategy, and intensifying inventory discipline. Due to the uncertainty around the duration and evolving impact of COVID-19, the Company is continuing to suspend guidance, however, unless further unforeseen COVID-19 related impacts occur, it expects to realize positive comparable store sales results and profitability in the fiscal fourth quarter. The Company anticipates reporting fourth quarter and full fiscal year 2020 results in late March.

Holiday Sales (the nine-week period ended January 2, 2021 compared to the nine-week period ended January 4, 2020)

Total comparable store sales increased 4.8% compared to last year and reflected a 29.6 percentage point sequential improvement from the third quarter of fiscal 2020. These positive results were adversely impacted in the high single-digit to low double-digit percentage point range, as a result of a significant reduction in consumer traffic related to the increase in COVID-19 cases;

Net sales were $1.770 billion, a 3.1% decrease compared to 2019, as strong console demand was offset by store closures under the Company’s planned de-densification strategy, temporary store closures mandated by local governments due to COVID-19, and industry-wide limited supply of new gaming consoles, and supply chain constraints broadly;

E-Commerce sales, which are included in comparable store sales, rose 309% and represented approximately 34% of total company sales, with total worldwide E-Commerce sales year to date reaching over $1.35 billion, far exceeding the Company’s $1.0 billion growth objective;

Regional Sales, in Australia/New Zealand, where the Company’s operations were materially less impacted by the effects of the COVID-19 pandemic, total comparable sales for the nine-week period increased approximately 31%, outperforming the Company’s other operating regions.

George Sherman said, “GameStop maintained its status as the omni-channel destination for gaming and entertainment with unprecedented demand for the new gaming consoles and a significant increase in E-Commerce sales. Demand for the new generation of consoles remains very strong, and as a result, we anticipate the consumer’s excitement for the new console technology will benefit us going forward well through 2021. We reported a 4.8% increase in comparable store sales, including over 300% increase in E-Commerce sales reflecting demand for new consoles, continued strength for Nintendo Switch and our expanded gaming product assortment. While E-Commerce sales contributed approximately 34% of total sales for the first nine weeks of the fourth quarter, our sales growth progression also includes an adverse impact to comparable transactions related to the meaningful drop in retail traffic during the holiday sales season due to an increase in COVID-19 cases around the world.”

Mr. Sherman continued, “Overall, we remain confident in both the positive growth aspects for 2021 driven by our strategy to add new and exciting product revenue streams across all things games and entertainment and the strong demand for the new generation for console-based video game products We look forward to executing on both of these areas in 2021 to expand our addressable market and product offerings supported by the many exciting opportunities to leverage our brand, extensive loyalty member base, and improving digital capabilities.”

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That being said what is the estimate for Q4 earnings:

Zacks Consensus Estimate

This video game retailer is expected to post quarterly earnings of $1.46 per share in its upcoming report, which represents a year-over-year change of 15%.

Revenues are expected to be $2.24 billion, up 2.2% from the year-ago quarter.

From the Q3 report we find the following:

Industry Overview in GME Q3 report

(Source: https://news.gamestop.com/static-files/a25f63ae-df8c-475d-b6a9-8747a1c79195)

Growth in the video game industry is generally driven by the introduction of new technology. Gaming consoles have historically launched in five to seven year cycles as technological developments provide significant improvements in the gaming experience and add other entertainment capabilities. Consumer demand for gaming consoles are typically the highest in the early years of the cycle and the weakest in the latter years. The current generation of consoles include the Sony PlayStation 4 (launched in 2013), Microsoft Xbox One (launched in 2013) and the Nintendo Switch (launched in 2017). The Sony PlayStation 4 and Microsoft XBox One are nearing the end of their cycle as Sony and Microsoft have successfully launched their next generation consoles, the Sony PlayStation 5 and the Microsoft Xbox Series X, in November 2020.

The sale of video games delivered through digital channels and other forms of gaming continue to grow and take an increasing percentage of physical video game sales. We currently sell various types of products that relate to the digital category, including digitally downloadable content (“DLC”), full game downloads, Xbox LIVE, PlayStation Plus and Nintendo network points cards, as well as prepaid digital and prepaid subscription cards. We have made significant investments in e-commerce, in-store and website functionality to enable our customers to access digital content to facilitate the digital sales and delivery process. We plan to continue to invest in these types of processes and channels to grow our digital sales base and enhance our market leadership position in the video game industry and in the digital aggregation and distribution category.

Business Strategy in GME Q3 Report

In May of 2019, we announced our multi-year transformation initiative, which we refer to as GameStop Reboot to position GameStop on the correct strategic path and fully leverage our unique position and brand in the video game industry. Our strategic plan is anchored on the following tenets.

Optimize the core business. Improve the efficiency and effectiveness of operations across the organization, including cost restructuring, inventory management optimization, adding and growing high margin product categories, and rationalizing the global store base. Prioritizing efforts to optimize the store base and improve the fundamental operations of the business yielded the net closure of 321 stores in fiscal 2019, 461 stores year-to-date in fiscal 2020, and included both the divestiture of the Simply Mac business and wind down of underperforming operations in Denmark, Finland, Norway and Sweden. Improved inventory management drove a significant increase in inventory turns and as a result, in working capital, while an intense focus on organization structure and expense reductions yielded a $315.9 reduction in reported Selling, General and Administrative costs year-to-date in fiscal 2020.

Build a frictionless digital ecosystem. Develop and deploy a frictionless consumer facing digital first omni-channel environment, including the recent relaunch and customer experience enhancements within GameStop.com, the launch of a completely new GameStop App, as well as the optimization of our retail store footprint to maximize our customer reach more broadly across all channels and provide them the full spectrum of content and access to products they desire, however, wherever and whenever they want to shop. Enhancements to the user shopping experience and improved omni-channel capabilities, including expanded delivery and payment options, yielded an increase in e-commerce sales of over 430% through the third fiscal quarter of 2020.

Become the social / cultural hub for gaming. Create the social and cultural hub for games and entertainment and expand GameStop’s addressable market through category and product expansion to offer the most comprehensive product offering across the GameStop omni-channel platform. Our customers are increasing their engagement across the spectrum of games, entertainment and technology and our focus remains to meet those expanding needs.

Transform vendor partnerships. Transform our vendor and partner relationships to unlock additional high-margin revenue streams through an expanded suite of product and service offerings to optimize the lifetime value of every customer.

Connected to our transformation efforts, we have incurred and continue to incur severance, store closure costs and expenses for consultants and advisors. See "Consolidated Results from Operations—Selling, General and Administrative Expenses" for further information.

We continually review and prioritize our capital needs and are committed to making investments in our infrastructure to drive our business plans and realize on our transformation initiatives. Key areas of investment include improving the presentation and content as well as the functionality, general search and navigation across our customer facing digital channels; improving customer data integration and customer relations management capabilities; continuing to enhance service offerings to our customers; continuing to strengthen and deepen our information technology, analytics, marketing and e-commerce groups; and creating more flexible fulfillment options designed to improve our delivery capabilities and reduce our shipping costs. These and other investments are expected to, among other things, provide a seamless and compelling customer experience across our omni-channel retail platform.

Again, as stated at the top, maybe someone with better knowledge of financial statements, can show me how the key metrics discussed here, leases, sales per store etc have changed througout the year 2020 and whether GME is headed in the right direction.

I believe the digital change in GameStop and the fresh Board of Directors will have a strong positive impact for GameStop going into the future. And I am looking forward to the earnings report Tuesday, especially looking for the amount of stores closed (also the amount of lease paid), changes in debt, their inventory management, and hoping to hear some further guidance going forward.

I see huge potential over every channel for Gamestop and am in it for the long run. The opinions stated here are my own. Wishing you all the best, the Stonk Mizard

EDIT: Added the Industry Overview and Business Strategy Section from Q3 report for better insight into GME's transformation process.