Key facts
- GameStop CEO George Sherman stated that physical video game sales are irrelevant to the company's business.
- GameStop expects a 5% to 10% sales drop in 2019.
- The company reported declines in new hardware and software sales.
- GameStop's stock price fell significantly following the earnings report.
- The company is expanding into esports and focusing on collectibles.
- GameStop sold its Spring Mobile business for $700 million to reduce debt and reinvest.
GameStop CEO George Sherman has declared that physical video game sales are 'irrelevant' to the company's business strategy, signaling a significant shift in focus for the struggling retailer. This statement comes amid declining sales figures and a strategic pivot towards areas like esports and collectibles.
In its recent earnings report, GameStop projected a sales drop of 5% to 10% for 2019. This forecast, combined with a reported decrease in new hardware and software sales in the fourth quarter, led to a sharp decline in the company's stock value, which fell 13% to $8.82 per share, its lowest point since 2004. The company's financial struggles are attributed to the growing dominance of digital game distribution, game streaming services, and online retailers.
To navigate these challenges, GameStop has appointed George Sherman as its new chief executive officer, replacing interim CEO Shane Kim. The company is also actively expanding into the esports sector, aiming to create cultural experiences for player development and professional gaming. Furthermore, GameStop recently sold its Spring Mobile business for $700 million, intending to use the proceeds to reduce debt, repurchase shares, and reinvest in its core gaming and collectibles business.
Despite being the largest brick-and-mortar video game retailer in the U.S., GameStop reported a 3.1% decrease in total global sales for the 2018 fiscal year, reaching $8.3 billion. The company also incurred a net income loss of $187.7 million in the fourth quarter. In response, GameStop is initiating a cost-saving and profit improvement plan to strengthen its future financial performance.