By Svea Herbst-Bayliss
BOSTON (Reuters) – Ratings agency S&P Global Ratings on Wednesday raised GameStop’s credit rating by one notch, a critical step in the video retailer’s transformation into an e-commerce company.
S&P Global Ratings said in a note that it lifted GameStop’s credit rating to “B” from “B-” and removed it from CreditWatch after the company issued $550 million in equity and redeemed all balance sheet debt.
“We expect these actions to provide additional runway to achieve its business transformation initiatives, provide liquidity, and improve GameStop’s financial risk profile,” S&P analysts wrote.
S&P’s move was seen to help the company significantly, by putting it into a better position to negotiate terms with suppliers.
Last month, GameStop announced that Ryan Cohen will be named chairman at the annual meeting in June, further solidifying the turnaround the co-founder and former chief executive of online pet food retailer Chewy Inc has been pushing since he joined the board in January.
Cohen, who owns 13% of GameStop through his RC Ventures LLC, has helped overhaul the board and reshuffled top management. The company is seeking a new CEO and a new CFO. On Monday GameStop said it is opening a distribution center in Pennsylvania to further aid its push into e-commerce.
S&P praised GameStop’s raft of new initiatives and forecast stronger earnings.
“For fiscal 2021, we forecast GameStop will sustain better performance, noting the recent improvement … including a meaningful increase in same-store sales in the first quarter,” the note said.
S&P gave GameStop high marks for bringing in executives with technology and ecommerce backgrounds, which reinforces “the retailer’s intention to reinvent itself.”
Still, competition will be fierce and the note said: “Prospects for success remain unclear.”
GameStop’s share price has surged 746.50% since January, fed by heavy buying among retail investors following online forums on Reddit.
(Reporting by Svea Herbst-Bayliss; Editing by David Gregorio)
