By Spencer Mann,
Money and Investing Writer
Once the store that millions of kids would swarm to as their favorite video game retailer, GameStop (NYSE: GME) has seen its fortunes turn in recent time. The virtual gaming specialist went years dominating this retail sector, yet concern is growing that they have lost their advantage. According to CNBC, shares fell 13 percent in one day, as the company released its last quarter data.
This fall just exasperates a drop of 30 percent in the past 12 months. Per its reports, GameStop produced $2.04 per share in the 4th quarter of 2016, as compared to $2.38 just a year before. Significant losses accumulated in both video game and console sales. By being downtrodden in both categories, investors appear very certain that this was more than a short-term dilemma.
In the earnings report, the company provided some commentary on the disappointing data. It noted “aggressive” sales tactics by big-box retailers, such as Target, Walmart, and Amazon during Black Friday and the holiday season. By admitting so, GameStop sees these sellers, which are not traditionally video game oriented, to be significant competition moving forward. Retailers in other industries also share this sentiment, as these companies are competing with each other by waging large-scale price wars to attract customers from the opposition.
It appears that the video game companies are also receiving a share of the blame, as GameStop expressed its disappointment that Microsoft, Sony, and Nintendo are not pushing innovation in their consoles.
Microsoft and Sony have not released updates to their hardware consoles as often as in the past, while Nintendo’s largest release for the past quarter, the NES classic, is just a compilation of 30-year-old games. It is hardly easy to blame these console companies for doing so, as they appear content in search of new success on mobile and cloud-based services.
With this news, GameStop shared its plans to close 3 percent or approximately 150 brick-and-mortar locations across the globe. Despite this, however, the company is not planning to wave the white flag anytime soon. In light of the expected closings, the company intends to open over 100 new stores, hoping to tap into different digital sectors.
As a part of its “diversification” process, GameStop is ready to promote more “pop culture” entertainment items in these anticipated locations. Additionally, a silver lining to last quarter’s very disappointing sales is that the firm’s “Spring Mobile” wireless mobile retail service has helped to offset losses in gross margin from its video game sales.
During its time evaluating itself and preparing for an unknown path ahead, GameStop has decided to abstain from releasing quarterly revenue reports, as shared in a statement from its Chief Financial Officer Rob Lloyd.
This revelation is likely a sign that the company expects similar results in the coming quarters. To offset unnecessary speculation, the former video game mammoth intends on keeping as much information quiet as possible.
If the revenue data ever turns the quarter, one would imagine that GameStop would be proud to release it to the public to regain confidence. Until then, however, much doubt over its economic model remains.
While some are saying that the collapse is inevitable, as brick-and-mortar oriented stores are no longer feasible for this industry, the company will work to effectively stabilize its reputation and valuation among investors.
A version of this article appeared in the Tuesday, April 4th, 2017 print edition.
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