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The largest video game retailer GameStop has announced that it will close "between 180 and 200 underperforming stores" over the next six months. The statement follows 195 store closures in the last 12 months and is expected by the company to be "a much larger slice of closures in the next 12 to 24 months".
Although it may seem dramatic at first glance, even hundreds of store closures could have a relatively moderate impact on a chain that still has 5,700 stores worldwide. And GameStop's CFO, Jim Bell, said in a recent call for results that 95% of these stores still display positive results, suggesting that the bottom has not completely disappeared from the chain's locations.
GameStop runs the current game of closures with the aim of "optimizing[e] the store portfolio "through" densification "in some markets where several stores serve" overlapping trading areas. "That said, it is still bad that a retailer is planning to close stores instead of to open new ones, and for GameStop, it's a sign that comes after months of bad news, including major layoffs, executive departures, a failed sale attempt, reports of recent gains and a stock price that continues to fall.
The company's latest quarterly earnings report did not contain much suggesting an imminent reversal. Losses more than tripled compared to the same period last year and sales decreased 14.3% from one year to the next (or 11.6% when Stores that have been closed in the meantime). This includes a 5.3% reduction in software sales, a 17.5% reduction in used vehicle sales and a huge 41% drop in equipment sales. Sales of collectibles were the only positive point: they rose 21%, marking a 15th consecutive quarter of growth in this category.
At the time of writing, the GameStop stock was down 8.5% from the close of $ 4.65 posted Monday. This price has dropped more than 70% compared to a year ago and about 92% from a peak reached at the end of 2013.
Bell admitted in the results call that it was "results that are certainly lower than we would like" and warned investors "to expect our sales from one year to the next. other are down over the next three or four quarters ". But the company was still hoping things would start turning around late next year, when players would come to GameStop to buy new Sony and Microsoft consoles (both, Bell pointed out, have readers of disc that could help increase retail game sales).
"In our opinion, our current commercial performance reflects the natural end of the console cycle, which should rebound with the launch of the consoles later in 2020," said GameStop CEO George Sherman.
The recovery plan
GameStop, however, does not rely solely on new hardware to maintain profitability. During the call for results, Sherman presented a multi-point plan to strengthen the "credibility of the company with its customers" as the only retail outlet to aggregate everything related to video games and pop culture … [and] the authority of the video game in countless neighborhoods of the world ".
The first point of this plan becomes more efficient. This means closing stores, but also streamlining the number of products (or SKUs) in each site to focus on those that can be "very productive … from a demand perspective". In other words, expect fewer examples of niche games and collectibles on the shelves.
Beyond the simple sale of games, GameStop wishes however to transform itself to create "a social and cultural center of the game in each store GameStop". It means testing more "try before you buy" experiences in stores, plan in-store gatherings around esports viewing and create another "high margin immersive experimental gaming content" designed to bring players together in a physical space. This initiative will not completely change all GameStop sites, but key sites in some markets will test more and more ideas in this direction, Sherman said.
The most interesting pillar of GameStop's turnaround plan, however, could be its efforts to leverage its sales force to create better partnerships with console manufacturers. "Our more than 50,000 knowledgeable associates worldwide remain the only full-time, dedicated sales force in the video game industry," said Sherman, noting that these associates can "bring tremendous value to console builders." Sherman said GameStop was working with these console manufacturers to create a new sales model that "rewards us for customer acquisition and the lifetime value spectrum".
All of this is rather vague, but it would seem that GameStop is looking for better conditions for console builders when it comes to pushing their hardware – a solution that may reflect all the digital sales that the manufacturer of Consoles will get once the buyer has brought home the console. It is easy to consider GameStop looking for new contracts in which each console manufacturer offers the retailer (and its sales associates?) A bonus for selling their hardware instead of the competition. Perhaps GameStop could play the role of console manufacturers against each other, asking everyone to provide increased "motivation" to its sales force to sell its specific console.
This is for the moment a fun speculation, of course. What is clear, however, is that GameStop does not give up without a fight and that it seems to want to leverage its existing scale and sales force to try to revive a moribund business based on on the sale of games on discs.
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