The end of a console cycle can be a difficult time for video game retailers, as computer hardware sales decline in anticipation of new launches. As a factor in the decline in retail sales and physical games sales, this means that GameStop is currently going through an extremely difficult time.
Sales decreased overall by 13.3% (11.5% when currency fluctuations are taken into account). The average decrease in comparable stores in the United States was 10.3%. The decrease is attributable to the sharp decline in console hardware sales, as sales in this sector fell by 35%, despite strong sales growth from the Nintendo switch. In comparison, software sales decreased by only 4.3%, according to GameStop, attributable to "lower launches of new titles in the quarter compared to the previous year". Although the company did not lose money in the first quarter of 2019, its net profit dropped to just $ 6.8. M, down from $ 28.2 million in the first quarter of 2018.
One of the main potential weaknesses for console sales in 2019 is the potential for upwardly transparent compatibility with the next generation of consoles. We do not know all the details about how Sony and MS are going to handle this problem, but assuming that both companies are taking the same approach and making their current generation libraries fully compatible with previous releases, new software sales do not necessarily fall, especially where appropriate. an option for the PS4 era titles to correct for higher performance on PS5 without having to release a brand new version of the game (of course, we will probably see at least a few PS3 and PS4 – remakes also come back on PS5).
But the damage to GameStop sales was not limited to new hardware. Sales of used vehicles have also decreased by 20%. GameStop is essentially the owner of the used games market, which makes it a huge source of revenue.
According to the president of the company, George Sherman, GameStop is restarting. At the company's last conference call, Sherman called the company is relaunching "a comprehensive and comprehensive review of all aspects of our business and how we can transform it – this is going to be a critical part of our transformation – it's not just a cost-cutting initiative. However, there will be an element of this in the overall process.I am expecting this process to lead to margin improvement, including improved supply, prices and promotions. as well as an optimization of our scope. "
As part of this effort, Sherman expects GameStop stores to laser focus on the companies that make the most money, cut areas that do not, and find new contiguity and markets. which extend if they are perfectly suited to its brand. and business. ThinkGeek, for example, will be integrated with the GameStop shopping experience. The company has eliminated its quarterly dividend, which will save it $ 157 million a year.
GameStop talks about braving the game, but the current move to digital distribution may kill the company. By all accounts, console gamers are clearly oriented towards digital distribution channels, just like PC gamers. The fact that the company's shares are now trading at levels not seen since the early 2000s attests to the poor performance of the company in recent times.
It is clear that investors are not sure that GameStop can really contribute to a market strategy that does not rely on physical game sales as the main source of revenue. If players continue to refrain from buying physical games, sales of used vehicles will also drop naturally. At present, it is not clear that GameStop can create enough secondary market for accessories and sales of digital games to replace other markets' income.
GameStop is looking for a buyer, an agreement that could reshape the console game
GameStop Launches Blockbuster-Era Game Rental Service
GameStop's weak fourth-quarter sales revenue will close more stores