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GameStop blames sales slump on PS5 and Xbox Scarlett hype

GameStop

GameStop is blaming their sales decline on the incoming release of the next generation of game consoles. According to speculation within the reports, consumers have stopped investing in hardware since they’re waiting for the newest to ship. Granted, this is probably a contributing factor, but GameStop has been struggling to remain relevant for years now.  GameStop just dropped its Q3 report for 2019, and things don’t look good.

Let’s move on to the specifics of this newly reported quarter. Total revenue was 25.7% down to $1.4 billion, with further slides expected in the future. A big part of this was a massive drop in hardware sales, which are down by 45.8%. CEO George Sherman says that this is expected to continue, and that other companies are seeing similar slumps. The upcoming launch of the PS5 and Scarlett, possibly in 2020, could see some resurgence for physical sales, but it’s questionable by how much.

According to the Q3 filings, GameStop posted a loss of $83.4 million for the quarter. Digging deeper though, we find a pretty bleak picture for the retailer. First up, new game sales are down by a whopping 32.6%. Used title sales are also down, though not as much, by 13.3%. This is likely due in part to the growth of other game distribution models, such as digital sales. Rentals certainly aren’t to blame though, Redbox recently announced it’s getting out of the video game sector entirely by mid-2020.

This drop in second-hand sales is worrying, as it’s the biggest component of physical media sales and profit for the retailer. This signals a major shift towards digital distribution, which means that GameStop’s plan to pivot better hurry up. The company announced that it would close some 200 stores as part of a wider reorganization effort. That wider effort would also include a new focus for stores, primarily on new product lines and an esports push.

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