Sales Slump: GameStop Addresses Declining Revenue, Streamlines Operations
On Tuesday, videogame retailer GameStop announced a reduction in its workforce as part of cost-cutting measures, alongside reporting lower fourth-quarter revenue. This decline was attributed to increased competition from e-commerce companies and subdued consumer spending in an uncertain economic environment.
Shares of the Grapevine, Texas-based company plummeted by 16% in after-hours trading following the announcement. Analyst Michael Pachter from Wedbush Securities highlighted the impact of digital downloads on physical retail, noting that without a compelling reason for consumers to visit stores, revenues are unlikely to rebound without efforts to drive store traffic.
Other U.S. videogame publishers, such as Take-Two Interactive Software and Electronic Arts, also reported disappointing earnings recently, reflecting industry challenges including high borrowing costs, inflation, and a slowdown in demand from pandemic highs.
In addition to job cuts, GameStop also exited its operations in Ireland, Switzerland, and Austria. As of February 3, the company had around 8,000 full-time employees and between 13,000 and 18,000 part-time associates globally, compared to 11,000 full-time employees and between 14,000 and 27,000 part-time employees in 2023.
Expenses decreased by 21.2% to $357.1 million, primarily due to lower labor, consulting, and marketing costs. Pachter speculated that while GameStop may continue trimming costs to achieve breakeven or better results, declining sales to unsustainable levels seem inevitable.
GameStop’s fourth-quarter revenue of $1.79 billion was lower than the previous year’s $2.23 billion, as it faced tough competition from online giants like Amazon and eBay. However, it reported adjusted earnings per share of 22 cents, up from 16 cents the previous year.
Additionally, the company appointed Daniel Moore as principal financial officer, a role he had been handling on an interim basis since August.
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