GameStop's big game retailer says it will close "between 180 and 200 underperforming stores" over the next six months. This statement comes after 195 store closures over the past 12 months, and what the company says they expect will be "a much larger tranche of closures over the next 1
While it may seem like drastic news at first Although hundreds of store closures can have relatively little impact on a chain that still has 5700 locations worldwide. And GameStop CFO Jim Bell said in a recent revenue interview that 95 percent of these stores still show positive earnings, suggesting that the bottom has not completely fallen out of the chain's position across the board.
GameStop spins the current set of closures as an attempt to "optimize [e] the store portfolio" through "decay" in certain markets that have multiple stores serving "overlapping trading areas." That said, there is always a bad sign when a retailer plans to close stores instead of opening new ones. And for GameStop, it is a sign that comes after months of bad news, including large layoffs executive departures, a failed attempt to sell companies, reporting earnings reports and a stock price that continues to tumble.
The company's latest quarterly earnings report did not include much to indicate an impending turnaround. Losses more than tripled as they were in the same period a year ago, and sales were 14.3% lower than the year before (or 11.6% when invoicing stores that were closed in the interim). That includes a 5.3% reduction in software sales, a 17.5% reduction in pre-owned sales and a huge 41% drop in hardware sales. The only bright spot was the sale of collectibles, which was up 21% to represent the 15th growth rate in that category.
As of this time, the GameStop stock was down 8.5% from Monday's close at a price of $ 4.65. This price is down by over 70% from a year ago and by about 92 percent from a high in late 2013.
Bell admitted in the earnings call that these are "results that were below what we want," and warned investors to "expect our year-over-year sales to be down over the next three or four quarters." But the company also remained hopeful that things would start to turn around late next year, when players would come to GameStop for new consoles from Sony and Microsoft (both, as Bell pointed out, have disk drives that can help boost retail gaming revenue).
"In our view, our current sales performance reflects the natural end of the console cycle that will rebound with console release later in 2020," said GameStop CEO George Sherman.
GameStop isn & # 39; But just rely on new hardware to bend the bottom line. On the revenue call, Sherman outlined a multi-point plan to burn the company's "credibility with customers as the sole outlet for the aggregation of all things video games and pop culture … [and] the video game authority in countless neighborhoods around the world."
The first point of that plan becomes more effective. That means closing stores, but also streamlining the number of products (or SKUs) in each location to focus on those that can be "very productive … from a demand perspective." In other words, you can expect fewer examples of niche games and collectibles in the shelves ahead.
Beyond just selling games, however, GameStop wants to transform itself into creating "a social and cultural hub for gaming in every GameStop store." That means testing more "try before you buy" shopping experiences, scheduling in-store collections around esports viewing, and creating other "immersive, high-margin experience game content" designed to bring players together in a physical space. Not all GameStop locations will be completely renovated by this initiative, but key locations in certain markets will test more and more ideas in line with this, Sherman said.
However, the most interesting pillar of GameStop's turnaround plan may be its attempt to leverage sales force to better partner with console manufacturers. "Our 50,000 plus knowledgeable employees around the world are still the only dedicated sales force in the video game industry," Sherman said, highlighting how these salespeople can "provide a tremendous amount of value to the console manufacturers." Sherman said GameStop is working with these console manufacturers to create a new sales model that "rewards us across customer acquisition and lifetime value spectrum."
It's all pretty vague, but it sounds like GameStop is looking for a better deal from console manufacturers when it comes to pushing their hardware – one that may reflect all the digital sales the console manufacturer will get after the buyer takes the console home. It's easy to imagine GameStop pushing for new deals where each console manufacturer gives the reseller (and its sales staff?) A bonus of selling their hardware instead of the competition. Maybe GameStop can play console makers against each other in this and ask each one to provide better "motivation" for the sales force to sell their specific console.
That's just a funny speculation for now, of course. What is clear, however, is that GameStop does not give up without a fight, and that it seems willing to leverage its existing scale and sales force to try to help revive a morbid business based on selling games on discs.