GameStop’s Stock Plunges In The Face Of Increased Digital Game Purchases

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The Motley Fool reports that GameStop is struggling to survive as more gamers are purchasing games digitally, and the company — also the world’s largest video game retailer — is facing a tough road ahead. Although GameStop has been struggling for years to boost its sales as digital game purchases continue to become more commonplace, it doesn’t appear to have worked. Last year, sales from continuing operations dropped 3 percent to $8.3 billion.

Taking a closer look, sales of new software, new hardware, and preowned games all dropped in the face of an increase in gamers purchasing digital products through their PlayStation or Xbox console. And in terms of the future, management has predicted a drop in 5 to 10 percent of total sales and comparable-store sales in fiscal 2019.

But despite the drop in sales, GameStop still had $8 billion in annual sales and is a recognized industry brand, so it’s not going anywhere. In addition, last year the company’s accessories sales jumped 22 percent and collectibles increased 11 percent. Not only that, but GameStop snagged over $1 billion in sales from digital purchases from GameStop’s online store or post-purchase downloads.

To keep the brand relevant, the video game giant is taking numerous steps, including investing in the eSports market. For example, in late March GameStop signed partnerships with eSports organizations like Complexity Gaming. The contract means that GameStop will be the title sponsor of Complexity Gaming’s new headquarters in Dallas. Of course, whether these kinds of partnerships will help boost sales for GameStop remains to be seen.

Per Variety, GameStop replaced interim CEO Shane Kim with George Sherman last month. Just one week after Sherman’s appointment, the company released its plans to expand into eSports as a method of refocusing its business to focus on video game culture as opposed to just sales.

“We are aiming to become the official pop warner league of eSports where GameStop provides fun and unique cultural experiences for player development while preparing the next generation of professional gamers – it doesn’t get any better for amateurs of all ages looking to learn and compete at the highest level,” said Frank Hamlin, chief marketing officer for GameStop.

Rob Lloyd, chief operating officer and chief financial officer, said in a report that the company is eyeing “cost savings and profit improvement initiative” for the coming fiscal year.

For the coming fiscal year, the company said it is “embarking on a cost savings and profit improvement initiative” to lay the foundation for a more stable financial future.

“As we think about 2019 and beyond, we recognize the challenges facing our pre-owned video game business and are prepared to address them as we continue to evolve our business model going forward.”