In an ongoing effort to “de-densify” the market, GameStop has stated in a post-earning call that the company plans in 2020 to meet or exceed the number of stores closed in 2019, meaning that at least 321 locations will be permanently shuttered.
The news should not come as a surprise as the struggling game vendor continue to trim whatever fat is possible from its organization to restructure for a gaming industry that has changed considerably over the years. On March 26 the retailer announced its fourth quarter net income of $21 million with revenue down 28% to $2.19 billion. As has been the trend all year, sales of software, hardware, accessories, and collectibles are down for the quarter.
As Covid-19 continues to require stores to be closed, GameStop reports that their online counterpart is picking up some of the slack caused by closed physical locations, with CEO George Sherman stating, “…we've seen an increase in store and online traffic over the past few weeks. We remain committed to continuing to meet those needs in a safe environment.”
These next few months could break GameStop, which to many would not be a surprise as the death knell has been heard off in the distance for years now. What marks these months in particular is the potential disruption of supply chains for new consoles.
Sony and Microsoft are both expected to release their new consoles this year, and as concerns of Covid-19 have spread around the globe, both organizations have remained steadfast in stating that their new consoles would not be delayed. However, this could change at any moment as economic uncertainty continues to shift production capabilities.
Even a slight delay in manufacturing, or a major shortage of the console at launch, could be the end of GameStop. As the organization has struggled to rebuild and rebrand, Sherman has told investors repeatedly that the release of a new console will bring consumers back into the stores and pump revenue up to justify costs.
The commitment to close as many stores as last year or more, at least 321 locations, represents a desperate maneuver to hold out for a little longer. In a healthy organization such a move to streamline operations and trim the fat would not cause anyone to blink an eye, but for GameStop, it’s a sing of ongoing hemorrhaging until the next generation of console arrives to save the day.
Whether or not the move will save the day is another matter, but there is good reason to be skeptical.
Source: fool.com, gamesindustry.biz