Unfortunately, baring a pretty severe downside surprise with Q4/holiday sales, I threw in the towel on the credit negative thesis on GME since I was anticipating a more dramatic credit event in 3Q or early 4Q relating to insufficient liquidity. They successfully completed a sale leaseback, calmed the market with their (only partially) successful exchange offer and have stated their intent to retire the remaining junior bonds, and have garnered renewed interest in the situation as reflected by the growing equity valuation.
However, I could not be more in agreement with the above that no one in the situation has demonstrated real knowledge of how the Company's business model works. It has almost nothing to do with e-commerce and everything to do with their used game business. Perhaps the recent activists do realize this, but can't outwardly say it because it would definitely cause a panic for the situation. Shrinking the Company's physical footprint as much as possible is really the best way to combat this problem, which is in line with the suggestions. I doubt margins on used games will be as high as current if you shift that business to an online fulfillment. I believe each store's used inventory is sourced directly from the store itself via trade ins, I don't think there is some central distribution of that stuff. Maybe there is some regional sharing among clusters of stores, I'm not sure. But you need the retail footprint in order to get that stuff back to customers quickly and with basically all margin.
One thing that struck me is odd is the chatter that GME is going to retain some percentage, definitely a single digit basis point, if any, of all future DLC/micro-transaction content that is purchased on any microsoft device bought via GME? I have seen several people state this citing some conversations with GME IR, but have not yet seen any specific confirmation from the Company. This could potentially be a shoe to drop on their next earnings call because I suspect it will be brought up. I wouldn't be surprised if this was maybe some deal that was inferred and never explicitly stated by the IR people, because otherwise the recent deal with microsoft doesn't really do much for GME at face value.
