GameStop has taken another significant step toward reshaping its business by announcing plans to close hundreds of its retail locations across the United States. This decision follows the closure of nearly 300 stores just last year and is indicative of the company's struggle to keep pace with changing consumer behaviors and the broader challenges facing the retail market.
According to recent reports, GameStop has faced a staggering 20 percent decline in net sales, dropping from $1.08 billion last year to $860 million this year. Amidst these difficulties, analysts paint a grim outlook for the retailer, with some stating, “GameStop has virtually no chance of returning to profitability in its core business” as they continue to reel from the effects of the shift toward digital game purchases and online shopping.
This latest announcement came to light through GameStop’s filings with the Securities and Exchange Commission (SEC), where the company revealed it is conducting what it calls a "comprehensive store optimization review." This assessment aims to evaluate their current portfolio and identify which locations may need to close. Interestingly, the specifics about which stores will be shuttered have yet to be disclosed, but the indication is clear: the number of closures could outpace those of previous years.
Founded back in 1984, GameStop once held the throne as the leading video game retailer, providing gamers everywhere with the latest titles and accessories. Fast forward to 2024, and the retail chain is now left with approximately 4,000 locations across the U.S. But it’s not just the States where GameStop is facing obstacles; they are also winding down operations overseas. Plans are already underway to shut down stores in Germany, coupled with reduced activities planned for Italy. Just last year, they closed all their stores in Ireland, Austria, and Switzerland.
The challenges faced by GameStop are reflective of broader trends within the U.S. retail sector. Reports indicate nearly 2,600 stores nationwide closed their doors within the first four months of 2024 alone, with predictions of up to 8,000 closures by year-end. Major retailers like Walgreens and Party City are among those also announcing significant store reductions.
Despite the setbacks, GameStop is not entirely sitting back. The company is exploring alternative strategies to rejuvenate its brand and possibly attract new customers. Part of this initiative involves collaborating with Collectors Holdings. This partnership allows GameStop to serve as an authorized dealer for Professional Sports Authenticator (PSA) services, introducing new offerings like trading card authentication and grading across select stores. While this move may seem promising, analysts at Wedbush caution against putting too much faith here, pointing out historic struggles with multi-channel sales strategies and other failed ventures, including NFT trading.
For those concerned about the nature of the gaming industry, the downturn at GameStop serves as an unsettling reminder. Sales of hardware and accessories recently plummeted by 28 percent, accompanied by software sales falling by about 15 percent. Even collectibles, once seen as a growing revenue stream, dipped by 3.7 percent, according to data compiled by Retail Dive.
The atmosphere surrounding GameStop has changed dramatically since its rise to fame as the poster child for the meme stock phenomenon of 2021, which drew attention from retail investors and financial analysts alike. Following this meteoric rise, the company’s stock long served as the subject of speculation, drawing significant interest from meme stock traders even just earlier this year. Despite some temporary spikes, the overarching tech trends and changing gaming consumer behaviors have rendered GameStop vulnerable.
So, what’s next for GameStop? Will these measures be enough to stay afloat? Analysts remain skeptical, but the company is determined to adapt to the new retail reality, mindful of the lessons learned from past efforts.