GameStop Will Continue Closing Stores Amid Customer Pivot To Digital

GameStop said on an earnings call that it’s going to close somewhere between 180 and 200 stores in an effort to expand its profitability, which has been dwindling in the digital age as customers buy fewer physical copies of games, according to a report by CNBC.

Shares in the company fell 15 percent on Tuesday (Sept. 10) after the company reported the losses.

“While we experienced sales declines across a number of our categories during the quarter, these trends are consistent with what we have historically observed towards the end of a hardware cycle,” CFO Jim Bell said about the dip.

The company said it expects that same-store sales will drop into the low teens. Shares have fallen more than 60 percent since January.

“Optimizing our store base for an increasingly digital world is essential for the future and increasing the profit productivity,” CEO George Sherman said Tuesday.

However, he said the company has a chance to “do even better and expand profitability” by cutting stores.

The company has upwards of 5,700 stores in 14 countries, and it has closed 195 stores since Q2 2018.

Much of the blame for the losses belongs to changing customer patterns. Customers can increasingly procure games digitally, or from eCommerce sites like Amazon. The shift to digital has been especially difficult for a company that thrived on the reselling of physical copies of games.

Sherman said GameStop is focusing more on digital offerings and is going to introduce a new buy online, pick up at store option.

“We will continue to manage the underlying businesses to produce meaningful cash returns, while maintaining a strong balance sheet and investing responsibly in our strategic initiatives,” Bell said.

One investor, Michael Burry, said he thinks GameStop still has potential. Upcoming consoles from Microsoft and Sony will still have physical drives, which means GameStop still has a lease on life, he said.