It is no secret that GameStop (GME) is a victim of a growing trend that is draining its pockets.
As gaming consoles have evolved to allow consumers to download games digitally, which is more convenient than purchasing physical game copies, it has negatively impacted GameStop’s sales.
In the company’s third-quarter earnings report for 2024, GameStop revealed that its net sales declined by about 20% year over year. The company also generated a gross profit of about $257 million during the quarter, which is a roughly 8% decrease compared to what it earned during the same quarter in 2023.
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GameStop even warned its investors in an SEC 10-K filing last year that digital gaming was a major threat to its business.
“Downloading of video game content to the current generation video game systems continues to grow and take an increasing percentage of new video game sales,” said GameStop in the filing. “If consumers’ preference for downloading video game content instead of physical software continues to increase, our business and financial performance may be adversely impacted.”
GameStop kicks off a major plan as its sales suffer
As GameStop struggles with its sales, the retailer has opted to rethink its retail footprint.
According to a new report from the Connecticut Post, GameStop has closed about five stores in Connecticut, specifically in Groton, Waterford, and Orange. GameStop’s website still lists 19 stores as open across the state.
GameStop did not immediately respond to TheStreet’s request for comment.
Digital gaming has affected GameStop sales since the store sells consoles and cartridges.
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The move from GameStop comes after it revealed in a securities filing last month that it plans to close a massive amount of underperforming stores. The retailer already closed nearly 300 stores in 2023.
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“We have also initiated a comprehensive store portfolio optimization review, which involves identifying stores for closure based on many factors, including an evaluation of current market conditions and individual store performance,” said GameStop in the filing. “While this review is ongoing and a specific set of stores has not been identified for closure, we anticipate that it may result in the closure of a larger number of stores than we have closed in the past few years.”
GameStop workers feel the brunt of store closures
A few weeks ago, some GameStop employees even took to Reddit to flag that they had been laid off due to their stores closing.
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In March last year, GameStop revealed in an SEC filing that it had laid off thousands of full-time salaried and hourly associates in an effort to cut costs.
“As part of our strategic plan to achieve profitability, we have recently undertaken cost reduction measures and other initiatives to improve the efficiency of our operations, including initiatives to reduce headcount,” said GameStop in the filing.
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