GameStop reported yesterday that they had one of the worst seasonal takes in many years this past holiday season. The Holiday 2019 period was down by 25% in terms of overall sales, leading stock price to tumble and outlooks to shift for the retailer. And same-store comparisons to the previous periods were also down by similar numbers. And when combined with the multiple years of losses reported so far, things look bleak.
2019 has been an exceedingly tough year for the retailer, the most recent Q3 filing suggested a huge drop in revenue, which looks to have only worsened for the company. GameStop already closed nearly 200 stores across their brand in 2019, and it was just recently revealed that another 60 would be shuttered by the end of Jan. 2020.
GameStop executives say the impending reveal, and later 2020 launch, of the PS5 and Xbox Series X will help stop the bleeding, but many remain unconvinced. It was this slump ahead of the new console generation which GameStop blamed much of their financial woes on in 2019, instead choosing to focus on revamping existing product lines and consolidating their supply chain to focus on the best-performing sectors and stores.
And by comparing stores within the sector, we can see just how gloomy the outlook appears. Just prior to declaring bankruptcy in 2017, Toys R Us announced that its third quarter 2016 sales were down 2.2%, with some store sales down 3%. Toys R Us managed to re-open later in 2019, but I doubt GameStop is going to have that luxury if things go south.
The news revealing the meager holiday outlook has many analysts saying it’s the final nail in the coffin. Seeking Alpha today said the company faces “challenging existential questions,” adding: “Downloading video games does away with the need for GameStop altogether.” The said: “GameStop could very well be among the next wave of old-school retailers filing for bankruptcy protection.”
In a prepared statement, GameStop chief executive George Sherman sought to reassure shareholders, reinforcing this earlier message of waiting out the wave and hoping for a brighter tomorrow via the new console generation.
As is usual when bad news like this strikes, stock prices entered free-fall. Monday morning’s $5.58 price dropped, with a current trading price of $4.71 overall. This is better than the August 2019 drop down to a terrible $3.21, but not by much.
But don’t be fooled into thinking that GameStop is the only one taking a beating. . EB Games in Australia closed 19 stores recently after rent costs became too high to keep the stores profitable. UK retailer GAME also announced the dumping of 40 locations after the worst year in British retail growth since 1995.
