[ad_1]
GameStop is down and many industry analysts and observers are skeptical about its ability to recover. The retailer yesterday announced a profit for the first quarter of its fiscal year 2020, where it had not achieved its revenue target. At present, the company's share price has dropped to $ 5, its lowest level since 2013.
For the first quarter, GameStop generated revenues of $ 1.55 billion. It was significantly less than the $ 1.64 billion expected on Wall Street. The company has actually cut costs to improve earnings per share, but it's not something it can do every quarter. And GameStop's prospects are disastrous in part because its core business – the sale of used equipment and games – is starting to dry up.
Revenue from second-hand games dropped 20% year-over-year last quarter. And hardware revenues dropped by 35% in the same comparison. And although the company has diversified into collectibles with its ThinkGeek brand, this growth has not been enough to offset other declines.
In addition to all this, GameStop has also eliminated its dividend program. Now that this stock is no longer paying shareholders, it could encourage more people to sell. In turn, this could create some price volatility.
So it's a lot of bad news and no major analyst expects it to change for the rest of the year.
"The combination of transformation initiatives, the ongoing consumption shift towards digital gaming and the current console cycle is at a very advanced stage that will likely make 2019 a very difficult year," said Joseph Feldman. , an analyst at Telsey Advisory Group.
Why is GameStop so bad?
Analysts focus mainly on the short term. They live a quarterly income report at a time. But if you look at what they say about Why GameStop's performance is so low that you can see that they are not necessarily doomed.
"The company's revenues have dropped by 20 percent compared to the first quarter of 2019, as a result of persistent traffic difficulties caused by a more difficult year of software release," analyst Baird Colin Sebastian wrote to investors. "While new hardware sales were down 35 percent year-over-year, Switch's growth was more than offset by lower sales of Xbox One and PlayStation 4. Reflecting a console cycle now long in the tooth. "
Sebastian is absolutely right about why GameStop is struggling today. Games like God of War, Far Cry 5 and Monster Hunter: World were launched in the first half of 2018. And the 2019 releases did not really match those successes. This means that fewer people are going to GameStop stores to trade old games.
And then you have the Xbox One and PlayStation 4, both of which are finally endangered. Anyone who wants to buy one of these consoles probably already has. And while Nintendo Switch is better than ever, it's not enough to catch up.
The rest of 2019 will probably not change that momentum. The second half of the year will have nothing to do with Red Dead Redemption 2, for example.
One more chance
So what does GameStop do about all this? Management plans to try new programs. He wants stores to be more user-friendly and more of a destination for game fans. The good news for general manager George Sherman, who took over in April, is that GameStop should have at least one last shot to prove its value to the players.
While 2019 may not have blockbusters to match the 2018 release schedule, big games are coming. But more importantly, the new material is coming soon. Sony has confirmed that it is working on the next PlayStation and that Microsoft will soon talk about its system.
And it's crucial for GameStop because it's always the place to buy new equipment. At the launch of PlayStation 4 and Xbox One in November 2013, GameStop accounted for more than half of their hardware sales. It lasted months. Amazon is more ubiquitous than ever, so GameStop may not capture more than half of the PS5 and upcoming Xbox sales, but it could still play a big role in that.
GameStop must therefore survive until the beginning of the next generation. And, in the meantime, he must find a way to change his stores to convince people who come for a PS5 to return regularly. It is simply not clear that society knows how to do it.
[ad_2]
Source link