American video game retailer GameStop has announced that it plans to close more than 100 retail stores worldwide as part of a move to cut costs. According to KTLA, the decision to close the stores was taken following a sharp decline in sales in the previous year. GameStop’s decision of closing down several of its stores also resulted in a sharp drop in the share prices of the company with shares falling more than 12 percent on Friday afternoon. In fact, across 2016, shares of GameStop fell by more than 31 percent.
GameStop reportedly owns over 7,500 brick and mortar retail stores across the world – with more than 4,400 stores in the U.S alone. While the company did not say the exact number of stores that would be closed, company officials put out an estimated figure of 2 percent to 3 percent of its stores. This means at the most, at least 190 GameStop stores would be affected by the decision.
According to GameStop CEO Paul Raines, the decision to close their stores was not an easy one. The company is, however, forced to do so because, in the fourth quarter of 2016, sales of video games hardware from GameStop fell by more than 29 percent while the sales of new software saw a 19.3 percent decline.
“We encountered stiff headwinds as we completed the third year of the console cycle,” Paul Raines said.
This also resulted in a sharp decline in the company’s sales figure — registering a good 13.6 percent drop in total sales when compared to 2015. In 2016, GameStop only managed sales of $3.05 billion. According to the company, many of the blockbuster video games on sale at GameStop encountered weak sales even during the height of the holiday season. This, according to the company, was chiefly due to the aggressive console promotions made by other retailers including Target and Walmart. In fact, GameStop went on to add that the overall video game category had become weak as consumers move towards purchasing games from digital stores or online retailers like Amazon. Another reason for GameStop’s misfortune is the fact that both Sony’s PlayStation and Microsoft’s Xbox consoles, the primary devices that drive the gaming market, have not seen a major update for quite some time. According to GameStop, this puts off several users from upgrading their consoles and creates a lag in business for retailers like GameStop.
However, in spite of the very gloomy sounding numbers, GameStop still managed to post a 44 percent increase in sales for its Technology Brands business. This wing of the company includes cellphone retailers like Spring Mobile. GameStop also did fairly well with its collectibles business division which owns the ThinkGeek brand. Sales at ThinkGeek surged by more than 28 percent in 2016 alone. Meanwhile, GameStop’s Chief Financial Officer Rob Lloyd also went on to announce that starting this year, the company will no longer share quarterly earnings.
“We believe that providing only annual guidance will reduce investor distraction as we continue to diversify the company and seek to maximize long-term shareholder value.”
While it remains unclear if GameStop’s decision to close down some of its brick and mortar stores would change the fortunes of the company, it is certainly not the only offline retailer that is struggling to compete with e-commerce stores – primarily Amazon. Other players in the offline field – including JCPenney, Macy’s and Staples – have all announced several store closures in 2016-17. In fact, just earlier this week, Sears – the owner of Kmart – indicated that it had “substantial doubt” whether Kmart would survive through 2017.
Note that at this time, GameSpot is yet to announce the details of the stores that would be affected by the company’s decision. In fact, we do not know for sure whether all these stores are in fact in the U.S. or not.
[Featured Image By Rod Mar/AP Images for GameStop]