GameS­top clos­ing up to 200 lo­ca­tions as game sales plum­met

The Morning Call - - BUSINESS CYCLE - By Robert Chan­nick

Act­ing with a sense of ur­gency amid fall­ing video game sales, ubiq­ui­tous strip mall re­tailer GameS­top is pulling the plug on up to 200 stores by early 2020, with a much larger set of clos­ings ex­pected within the next two years.

The Texas-based re­tailer has about 3,800 stores in the U.S.. The com­pany did not re­spond to a re­quest Wed­nes­day to iden­tify which stores are tar­geted for clo­sure.

Ac­cord­ing to the chain’s web­site, there are 12 GameS­top stores within a 15-mile ra­dius of Al­len­town, in­clud­ing lo­ca­tions in the Le­high Val­ley and Palmer Park malls.

Plans to close stores were out­lined Tues­day, shortly af­ter GameS­top re­ported a sec­ondquar­ter net loss of $415 mil­lion, and a 14.3% year-over-year sales de­cline.

“We are com­mit­ted to take quick and de­lib­er­a­tive ac­tions to im­prove the per­for­mance of the com­pany and set it on the cor­rect strate­gic path,” George Sherman, CEO of GameS­top, said dur­ing an earn­ings call with an­a­lysts.

GameS­top pointed to a 41% de­cline in gam­ing con­sole sales dur­ing the sec­ond quar­ter as the pri­mary neg­a­tive driver, but fall­ing sales of new and used soft­ware also weighed on re­sults. The com­pany said it hopes that next-gen­er­a­tion con­sole launches in 2020 will rev up store sales, but it is also look­ing to im­prove the ef­fi­ciency of its re­tail foot­print by clos­ing “over­lap­ping” store lo­ca­tions, and re­mod­el­ing some re­main­ing stores.

In ad­di­tion to clo­sures, GameS­top is launch­ing remodeled store concepts to cre­ate “a social and cul­tural hub of gam­ing within each GameS­top store,” Sherman said. The com­pany has be­gun test­ing out “ex­pe­ri­en­tial of­fer­ings” in the Tulsa, Ok­la­homa, mar­ket to im­prove prof­itabil­ity. GameS­top does not plan to com­pletely re­model its chain of stores, how­ever.

Be­yond the cy­cle of gam­ing con­sole and block­buster ti­tles — GameS­top said there have been no games this year ri­val­ing 2018’s top-sell­ing “Red Dead Re­demp­tion 2” — there are broader trends at work putting the re­tail video gam­ing sales model into ques­tion. Most no­table is the rise of buy­ing down­loaded games ver­sus phys­i­cal soft­ware.

His­tor­i­cally, GameS­top has “had a pref­er­ence for phys­i­cal games ver­sus dig­i­tal games,” but the com­pany is fo­cus­ing on mak­ing the dig­i­tal sales process eas­ier go­ing for­ward, Sherman said. That in­cludes dig­i­tal pur­chases both in-store and on­line through the com­pany’s re­cently re­launched web­site.

“Our as­sump­tion is that we’ll have a piece of both busi­nesses,” Sherman said. “Ob­vi­ously, we have a very, very sig­nif­i­cant share when it comes to phys­i­cal games. Phys­i­cal games are still a sig­nif­i­cant por­tion of the over­all gam­ing in­dus­try to­day.”

On­line gam­ing com­pe­ti­tion is heat­ing up, with Ap­ple set to launch its Ar­cade sub­scrip­tion ser­vice next week, fea­tur­ing more than 100 games that can be down­loaded and played on Ap­ple de­vices and com­put­ers. Google is plan­ning to launch Sta­dia, an on­line gam­ing ser­vice, in Novem­ber.

Founded in 1996, GameS­top bills it­self as the world’s largest video game re­tailer, with more than $8 bil­lion in an­nual rev­enues and 53,000 em­ploy­ees world­wide.

The pub­licly traded com­pany’s stock price was down about 11% mid­day Wed­nes­day to $4.50 per share.

The Morn­ing Call con­trib­uted to this story.

THE MORN­ING CALL

Act­ing with a sense of ur­gency amid fall­ing video game sales, ubiq­ui­tous strip mall re­tailer GameS­top is pulling the plug on up to 200 stores by early 2020, with a much larger set of clos­ings ex­pected within the next two years.

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