GameStop, which has been struggling to keep its brick-and-mortar stores afloat, announced earlier this week that it would close between 400 and 450 stores this year. The gaming retailer has also said that it expects even more closures next year.
In March, the company stated it was planning to shutter roughly 320 stores by year’s end. However, as a result of the global COVID-19 pandemic, a growing number of consumers have shifted to online shopping. Although GameStop’s second-quarter online sales increased an astounding 800%, which amounts to 20% of its total sales, in-store sales decreased 12.7% – sending shares down 10.88% in extended-hours trading Wednesday.
GameStop, founded in 1984, has reported a second-quarter loss of $1.40 per share, more than the $1.27 loss analysts had projected. Revenues of $942 million were slightly above the consensus estimate by 0.48% but declined $358 million from the year before.
GameStop (GME) Chief Financial Officer Jim Bell said in an earnings call this week that the closures will enable the company “to more efficiently and profitably service customers.” The retailer was already struggling last year as it grappled with decreasing sales of physical video games, one of the company’s core products.
Management informed investors on the call that the company had cut expenses by $133.7 million during the quarter and reduced inventory by 50% on a year-over-year basis. This was enacted to make cash flow available for setbacks stemming from the health crisis and to prepare for the launch of new products. In addition, earlier in the year CEO George Sherman took a 50% pay cut, while Chief Financial Officer Jim Bell took a 30% cut.
Headquartered in Grapevine, Texas, the company operated 5,509 retail stores throughout the United States, Canada, Australia, New Zealand, and Europe as of February 1, 2020. Now, it has 5,122 stores around the world – hundreds less than it did it last year. At the start of the COVID-19 pandemic, the company was criticized for keeping its stores open, a decision they reversed in March in response to the negative feedback.
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