Video game retailer GameStop has seen better days. In August, the company announced a huge round of layoffs that affected more than 100 employees, including some Game Informer staff members. The company's stock price is almost constantly low, trading around $ 5 per share compared to over $ 46 per share in 2015. GameStop has a plan to turn something around and now the retailer has shared more details.
During a earnings call on September 10, GameStop shared more details about what it calls the "GameStop Reboot" initiative. The overall objective of this is "to improve the financial performance of the business and to implement a number of initiatives that will support the long-term success of the business and create value for stakeholders."
"We are committed to acting with a sense of urgency to turn around to areas of business that are critical to achieving long-term success and creating value for all of our stakeholders, "GameStop CEO George Sherman said in a statement. "We will set GameStop the right strategic path and take full advantage of our unique position and brand in the video game industry. Our strategic plan is anchored in four principles that include optimizing core business by leveraging efficiency and effectiveness, creating a social and cultural gaming center in every GameStop, building compelling digital capabilities and transforming our relationships with suppliers and partners in the emerging industry of video games.
"This is a compelling new strategic vision for the company and we have already begun to execute against all four pillars. We also remain committed to returning shareholders' equity and balancing this opportunity against the need to maintain a strong balance sheet to properly manage our business and invest in responsible growth. "
The four main pillars of GameStop's restart initiative include the following (described by GameStop):
- Kernel Optimization: Optimizing Core Business by Improving Efficiency and Efficiency across the Organization, including Cost Restructuring , optimizing inventory management, adding and expanding high-margin categories and streamlining the global store base.
- Become a Social / Cultural Game Center: Create a social and cultural hub for games through the GameStop platform by testing and enhancing existing core assets, including in-store experience, knowledgeable contributors, and PowerUp Rewards loyalty program. [1
- Transform Supplier Partnerships: Transform our supplier and partner relationships to unlock additional high margin streams and optimize the value of each customer's life.
Sherman spoke at length about each of the pillars during the call to profit; you can listen to the webcast here to hear everything Sherman had to say.
GameStop is already embarking on its ship repair plan. Most recently, the company has relaunched its website (now with ThinkGeek included), which features more rational shopping, which aims to allow customers to find what they want and buy it more smoothly. In addition, GameStop is testing new pilot stores in Tulsa, Oklahoma. Some of the concepts in the store are focused on competitive gaming and "electronic leagues at home". While other concept stores will sell extremely retro games and hardware.
Another part of GameStop's plan to turn things around is to scale back. The retailer confirmed in a profit call that it plans to close 180-200 stores with "less results" by the end of the company's current fiscal year (end of February 2020). The store has 5,700 stores worldwide, so upcoming closures – if they reach 200 stores – account for about 3.5 percent of its total base. The company added that it expects a "much larger tranche of closure" to follow in the next 12 to 24 months, although a specific number has not been provided.
The management added that it was "rapidly developing a perspective" on how many more stores would close in the future. The company is taking a "very specific approach" to address specific store closures, the company said. In particular, a company may look to "deactivate" its storefront, which means that stores with overlapping shopping areas may close. GameStop also pointed out that its average rental land is two years, so the company is generally not financially involved in a specific area for an extended period of time.
Don't expect GameStop to turn things around overnight. During the call, Sherman said, "This transition will take time."
As for GameStop's most recent earnings, for the quarter ended August 3, the company saw its global sales decline by 14, 3% to $ 1.3 billion. GameStop reported a net loss of $ 415.3 million for the quarter, far worse than the $ 24.9 million the company lost in the same period last year.
Each category, except collectibles, declined in sales during the year.
New hardware sales fell by a whopping 41.1%, a decline that GameStop gave to the announcement of next-generation consoles coming in 2020. New game sales fell 5.3% overall; Sales of games with the Nintendo Switch have grown, but this has not been enough to offset "weaker launch titles" across all systems compared to the same period last year. Meanwhile, accessories sales fell 9.5 percent, while previous sales fell 17.5 percent. Digital sales fell 11.2 percent "due to lower headline launches." Collective sales, however, jumped 21.2 percent, which proved to be the only major bright spot for the retailer.
"While we experienced a decline in sales in a number of our categories during the quarter, these trends are consistent with what we have historically seen toward the end of the hardware cycle," GameStop CFO Jim Bell said. "We will continue to manage our core businesses to produce significant cash returns while maintaining a strong balance sheet and investing responsibly in our strategic initiatives. "
In the future, Bell stated that GameStop expects total sales to continue to decline significantly. Quarters are coming, as the industry expects the release of next-generation consoles during Holiday 2020. He said that both the Xbox Scarlett and the PS5 were announced, at least in part, earlier than in the past, which hurt GameStop, he said. , as users may be delayed in purchasing systems if they know the new one is coming later, while the release of games may also be delayed as developers wait to release titles for the new systems.