GameStop, once the most dominant retailer in the video game space, plans to shut down 200 stores by the end of the year. And hundreds, if not thousands, more could be closing in the months to come.
The struggling retailer, in its earnings call Tuesday, said it was on track to close between 180 and 200 stores by the end of its fiscal year. But it advised investors that it expects to shutter more locations by mid-2022.
“While these closures were more opportunistic, we are applying a more definitive, analytic approach, including profit levels and sales transferability, that we expect will yield a much larger tranche of closures over the coming 12 to 24 months,” said GameStop CFO James Bell.
GameStop has over 5,700 stores worldwide. While Bell said 95% of those were profitable, the company has been facing increased headwinds as gamers opt for digital downloads, a trend that continues to grow. And game streaming services, such as Google’s Stadia, are on the horizon and expected to be a bigger part of the gaming landscape in years to come.
GameStop, which has already eliminated 14% of its corporate staff, is trying to reposition itself as the ‘local church’ of gaming, a cultural hub for players, with a generous return policy and game culture events.
It hasn’t impressed analysts.
Mike Hickey of Benchmark Company reduced his price target for the company nearly in half to $3 after the earnings call, comparing the company to “a Chernobyl experience.”
“The new management team appears detached from emerging digital trends, and the idea that GameStop will emerge as a social/cultural gaming hub is a bit of a stretch, in our view,” he said in a note to investors. “We believe the days of GameStop’s channel dominance/relevance will not return, and a strategic effort to gain market share on PC against Steam and Epic is unconvincing at best.”
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