Things aren't looking good for the floundering company.
Troubles continue for embattled game retailer GameStop. Yesterday, the company released its Q2 2020 earnings report, and the numbers show a 26.7% year-over-year decline. In total, GameStop reached only $942 million in net sales in a quarter characterized by ongoing restructuring and the COVID-19 pandemic.
Part of that restructuring saw ex-Nintendo of America boss Reggie Fils-Aimé joining GameStop’s board of directors and a host of store closures. This has not been enough to keep the company from posting losses during the quarter, however, and CFO Jim Bell told investors during an earnings call that it planned to close more stores--another 400 to 450--before the end of the fiscal year.
Despite posting a nearly 27% decline in overall sales, GameStop CEO George Sherman noted during the call that this number was actually above company expectations.
“Results exceeded our own expectations even as temporary store closures related to COVID-19 resulted in 13% fewer store operating days in the quarter versus second quarter last year, and year-over-year, we have 10% fewer stores worldwide,” Sherman told investors. “Our quarterly sales results were negatively impacted by both the global pandemic and, as we've discussed before, the last few months of a seven-year-long hardware cycle.”
The lament that things will pick up for GameStop once the new console hardware launches is not a new one. Sherman has been espousing such sentiment since last year despite a steady decline in sales over the last few years. The more widely-accepted culprit is likely today’s digital games landscape. Consumers are buying fewer physical games today, opting instead for digital downloads. This has forced GameStop to reexamine its position as a reseller, and shift focus to more specialized offerings.
Elsewhere in yesterday’s earnings report, the company noted that 46.9% of its sales came from hardware and accessories, which is a touch higher than the 43.2% from the same period last year. However, software sales dropped from 43.4% to 41% this quarter, and collectables fell from 13.4% of sales to 12.1%.
Amid continued losses, GameStop has suspended its guidance, a policy that began at the onset of the COVID-19 pandemic.
GameStop’s continuing decline is a side effect of a shifting games industry that has come to place an emphasis on digital media coupled with the retailer’s inability to adapt to this new environment. It’s hard to predict anything but the worst for the company. Already, it has shuttered its ThinkGeek merchandise vertical and laid off a number of the staff of Game Informer magazine. Hopefully such layoffs can be prevented in the future, but GameStop’s recent track record inspires little faith.
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