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(Bloomberg) – GameStop Corp. tumbled 40%, its lowest level in 16 years, after dying sales and halted its dividend, signaling that the troubled retailer is out of step with rising trends in video games.
The latest deficit for GameStop reflects what, according to analysts, could constitute a fundamental mismatch between the company's business model, primarily focused on the sale of physical game drives in physical stores, and the trend of the industry. to point to online games like the free game. -play Fortnite.
Comparable sales – a closely watched performance measure – fell 10.3% last quarter, GameStop said Tuesday night. Analysts had estimated the decline to 6.4%, according to Consensus Metrix. The 38-cent quarterly dividend cut will save about $ 157 million a year, the company said.
GameStop's drop on Wednesday was the strongest since it went public in February 2002, dropping to $ 4.71 in New York. This is its lowest point since February 2003. The retailer has lost about 95% of its market value since its peak of more than $ 10 billion at the end of 2007, worth less than $ 500 million.
'Dramatic pivot'
The company based in Grapevine, Texas, "has to face the need for a dramatic pivot, in-depth changes and aggressive action to remain relevant," said Wednesday Stephanie Wissink, an analyst at Jefferies .
Although GameStop's adjusted earnings were better than expected, the drop in sales suggests that the company can not recover from its decline. Sales of gaming equipment dropped by 35% – penalized by the decline in demand for Xbox One and PlayStation 4 – while software sales fell 4.3%.
GameStop is embarking on a cost-cutting strategy with a new CEO, but investors are pessimistic that its core business can get back on track. Even before the declines late Tuesday and early Wednesday, stocks were down 38% this year.
"The combination of the transformation initiatives, the ongoing consumption shift towards digital gaming and the current console cycle is at a very advanced stage that will make 2019 a very difficult year," said Joseph Feldman, Telsey Analyst. Advisory Group.
Earlier this year, Apple Inc. and Google announced the launch of online gaming services. And well-established gaming companies, such as Activision Blizzard Inc., are transferring more of their titles to a free online model.
GameStop also announced a cost reduction for its ThinkGeek collectibles business by consolidating online operations with the company's main website.
George Sherman, a retail veteran who took office as CEO in April, has appointed four senior executives to join his turnaround team, including a new chief financial officer and a new sales manager. Sherman said he wanted to declutter stores and focus on the best-selling products. He is also looking for ways to increase the company's digital business and to organize more events in the stores.
"We owe it to our team to develop a better strategy and a better product for our client," he said during a conference call Tuesday. "We have a lot of work ahead of us, we are ready for the challenge."
(Add the CEO's comments to the penultimate paragraph.)
–With the assistance of Ryan Vlastelica.
To contact the reporter on this story: Christopher Palmeri in Los Angeles at [email protected]
To contact the editor responsible for this story: Nick Turner at [email protected]
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