The Loadout Blog

News|Gaming

Over the last several years video game retailer GameStop has been on hard economic times. In August, GameStop announced a massive layoff of 100 employees which included some from the Game Informer staff. The company stock is trading at a near all time low of about $5 a share. When back in 2015 GameStop was trading at about $46 a share. GameStop has seen some rough times over the past years and has a plan to turn it around for shareholders and consumers.

Yesterday, during the earnings call GameStop shared more details on their for reconstruction. The reconstruction initiative will be called “GameStop Reboot”. The aim of this reboot is to “improve the financial performance of the business and implement a series of initiatives that will support the long-term success of the business and value creation for stakeholders.”

GameStop CEO George Sherman spoke at length about the GameStop Reboot Initiative. CEO George Sherman states, “We are committed to acting with a sense of urgency to address the areas of the business that are critical to achieving long-term success and value creation for all our stakeholders. We will set GameStop on the correct strategic path and fully leverage our unique position and brand in the video game industry. Our strategic plan is anchored on four tenets which include, optimizing the core business by driving efficiency and effectiveness, creating the social and cultural hub of gaming within each GameStop, building compelling digital capabilities, and transforming our vendor and partner relationships for an evolving video game industry.”

“This is a compelling new strategic vision for the company, and we’ve already started to execute against all four pillars. We also remain committed to returning capital to shareholders and balancing that opportunity against the need to maintain a strong balance sheet to properly run our business and invest in responsible growth.”

Sherman continues, “We are committed to acting with a sense of urgency to address the areas of the business that are critical to achieving long-term success and value creation for all our stakeholders,” GameStop CEO George Sherman said in a statement. “We will set GameStop on the correct strategic path and fully leverage our unique position and brand in the video game industry. Our strategic plan is anchored on four tenets which include, optimizing the core business by driving efficiency and effectiveness, creating the social and cultural hub of gaming within each GameStop, building compelling digital capabilities, and transforming our vendor and partner relationships for an evolving video game industry.

“This is a compelling new strategic vision for the company, and we’ve already started to execute against all four pillars. We also remain committed to returning capital to shareholders and balancing that opportunity against the need to maintain a strong balance sheet to properly run our business and invest in responsible growth.”

Below is the breakdown of the four main pillars of GameStop Reboot Initiative.

• Optimize the Core: Optimize the core business by improving efficiency and effectiveness across the organization, including cost restructuring, inventory management optimization, adding and growing high margin product categories, and rationalizing the global store base.

• Become the Social / Cultural Hub for Gaming: Create the social and cultural hub of gaming across the GameStop platform by testing and improving existing core assets including the store experience, knowledgeable associates and the PowerUp Rewards loyalty program.

• Build Digital Platform: Build compelling digital capabilities, including the recent relaunch of GameStop.com, to reach customers more broadly across the omni-channel platform and give them the full spectrum of content and access to products they desire.

• Transform Vendor Partnerships: Transform our vendor and partner relationships to unlock additional high-margin revenue streams and optimize the lifetime value of every customer.

The Reboot initiative is already in play for GameStop. They have recently re-launched their website to make it easier for customers to find what they want to buy. In Tulsa, Oklahoma GameStop is testing out a new store concept focused on competitive gaming and e-leagues. While other concept stores will sell retro games and hardware. 

Another part of the initiative is to scale down on GameStop locations. GameStop is looking to close between 180-200 GameStop locations as apart of the scale down by 2020. If the retailer closes 200 locations that will equate for 3.5% of its total store base.

GameStop is is taking a “very specific” approach to the closures and is looking to “de-densify” it’s store base. Which means the retailer is looking to  close overlapping stores in the same trade area. 

This Reboot Initiative will not happen overnight, it will take time.

GameStop latest earnings saw a drop in total global sales fall to 14.3%, which means a lost of 1.3 billion. GameStop posted a net loss of $415.3 million for the quarter. GameStop only lost $29.3 million during the same period last year. Which means GameStop suffered a $386 million dollar pitfall in sales.

Every category for GameStop has seen year-over-year decline in sales except in collectibles. 

New hardware sales fell a massive 41.1%. New game sales are down 5.3%. Accessories sales are down 9.3% and preowned sales are down 17.5%. Digital sales were down 11.2%. Collectibles are up 21.2%, which is the only bright stop for GameStop.

GameStop stated new hardware was down because of new consoles coming holiday 2020. New game and digital sales are down due to “weaker launch titles”.

CFO Jim Bell addressed the decline in sales stating, “While we experienced sales declines across a number of our categories during the quarter, these trends are consistent with what we have historically observed towards the end of a hardware cycle. We will continue to manage the underlying businesses to produce meaningful cash returns, while maintaining a strong balance sheet and investing responsibly in our strategic initiatives.”

Bell also states during the earnings call that, “GameStop expects total sales to continue to be down in multiple consecutive quarters to come, as the industry awaits the launch of next-generation consoles in Holiday 2020. 

He continues, “This hurt GameStop because consumers may hold out on buying systems if they know a new one is coming later, while game releases might slow, too, as developers wait to release titles on the new systems.”

Hopefully, the Reboot Initiative by GameStop will save gaming retailer from going the way of the Dodo bird. I want to see GameStop survive and thrive within the video game landscape because we need it within the community.

Do you think the Reboot Initiative will work? Let me know in the comments below.

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