Coverage of the meteoric surge in stock price in companies like GameStop and AMC Entertainment has been dominated by tales of individual investors—many of whom congregate on Reddit threads online to discuss tips and strategies for getting ahead in the market—who came together, ostensibly, to give hedge funds their comeuppance. But a recent analysis by Placer.ai suggests that there just might be some value in those brands' brick-and-mortar locations.
The stock price surges had "little, if not nothing," to do with factors like offline or online traffic or any other usual metric, Placer.ai maintains. But "like most other retail narratives, we need to be careful not to go for the simplest explanation, as it often obscures as much as it reveals."
The loss of physical traffic due to the pandemic was devastating for both brands—with AMC feeling that pain the most, with a monthly visit gap that was never smaller than 76.6% year-over-year in 2020. And while GameStop's numbers weren't as dire—the retailer narrowed its visit gap to 19.9% in August—the COVID resurgence this fall widened the gap to 27.1% in November and 24.1% in December, according to Placer.ai data.
But those numbers alone aren't determinative, Placer.ai suggests. In January and February of 2020, the brands saw an average monthly year-over-year gap as low as 0.7% for AMC and 2.1% for GameStop—still tough numbers, but much better than many expected after 2019 saw an average gap of -8.3% for AMC and -2.9% for GameStop. In other words, before the pandemic ground life as we knew it to a halt, both brands were faring much better than prior year performance would dictate.
In what Placer.ai calls "the optimist's case", harnessing a more experiential in-store approach to gaming will be critical for GameStop's success: "If done properly, it could position the chain in a better direction than it's had in a long time," the report states. And for AMC, the equation is a bit more complicated: movies are typically an affordable way for many to escape reality during financial crises, and the economic impacts of COVID are likely to stick around for awhile. This creates an opportunity for AMC. Another opportunity? Watching sports, TV shows, and premieres on the big screen.
"There's a huge opportunity to expand the focus of theatres to reach into new areas where group viewing is a huge draw," Placer.ai says. "Finally, the theatre doesn't need to be a limited idea. Focusing on more upscale experiential viewing could create more bang for buck for visitors and the chains themselves—presenting premium opportunities where the advantage of theatre-viewing is enhanced."
The pessimists' view, of course, is that both brands are out of date and out of touch in the era of Netflix and digital streaming.
The takeaway? All may not be as it seems, at least when it comes to the future of these brands' physical stores.
"Both AMC and GameStop are facing significant challenges to reaching their fullest offline potential," the report says. "Yet, both have opportunities in front of them that could lead to very successful futures. In both cases, it will likely rely on a mix of leveraging brand relationships they already have, while simultaneously pushing the boundaries of what they provide to create more evolved and enticing experiences."
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