Daily Management Review

GameStop Reduces Staff To Save Costs As It Experiences A "Unsustainable" Drop In Sales


GameStop Reduces Staff To Save Costs As It Experiences A "Unsustainable" Drop In Sales
Video game retailer GameStop reported lower fourth-quarter revenue due to sluggish customer spending in an uncertain economy and more competition from e-commerce companies. GameStop also said it has reduced expenses by eliminating an undisclosed number of positions.
The company's shares, which are based in Grapevine, Texas, fell 16% during extended trading.
"An increasing mix of digital downloads is hurting physical retail, and there is simply no reason to go to the store if a consumer can just order a game and download it immediately," Wedbush Securities analyst Michael Pachter said.
"Revenues are highly unlikely to rebound unless management figures out a way to drive store traffic."
Take-Two Interactive Software and Electronic Arts, two American videogame makers, also reported poor profits for the month of April. The gaming business is under pressure from rising financing costs, persistent inflation, and a decline in demand following pandemic peaks.
One of GameStop's latest cost-cutting initiatives was to close its stores in Austria, Switzerland, and Ireland.
About 8,000 full-time salaried and hourly workers and 13,000–18,000 part-time, hourly associates worked for the organisation globally as of February 3. This is in contrast to 11,000 hourly and salaried full-time workers and 14,000–27,000 hourly part-time workers in 2023.
Its expenses decreased by 21.2% to $357.1 million, mostly as a result of cheaper labour, marketing, and consulting fees.
"I suspect that they will keep trimming costs to generate breakeven or better, but it is inevitable that their sales will decline to an unsustainable level," Pachter said.
GameStop had a decline in revenue in the fourth quarter to $1.79 billion from $2.23 billion in the previous year due to intense competition from Amazon.com and Ebay.
It revealed 22 cents in adjusted earnings per share, up from 16 cents in the previous year.
Daniel Moore was elevated by the corporation to the position of principal financial officer. In August, Moore had assumed the position in an interim capacity.