Steve’s breakdown: The numbers are in and it may be a good time for GameStop to do an advertising game-changer campaign. Read on and maybe you’ll have the solution.
GRAPEVINE, TX: Online gaming is taking its toll on GameStop
in a big way.
The retailer said that its video game category was weak, particularly in the second half of the year. This challenge, combined with shoppers’ attraction to online gaming, contributed to a total global sales decrease of 13.6% to $3.05 billion for the fourth quarter ended January 28, 2017.
The company earned $208.7 million, in the fourth quarter, compared with profits of $247.8 million for the same period a year ago.
Meanwhile, consolidated comparable store sales declined 16.3% (-20.8% in the U.S. and -4.6% internationally, specifically). As stated in the company’s holiday sales release in January, the fourth quarter was significantly impacted by weak sales of certain AAA game titles and aggressive console promotions by other retailers on Thanksgiving Day and Black Friday.
For fiscal 2016, GameStop’s total global sales decreased 8.1% to $8.61 billion, while consolidated comparable store sales declined 11.0% (-13.5% in the U.S. and -4.4% internationally).
“As we continue our transformation plan, we will focus on managing SG&A spend, and maximizing free cash flow generation to drive shareholder value,” said Paul Raines, GameStop’s CEO.
He added that the chain will also “rationalize our global store portfolio,” a move that is pushing GameStop to close between 2% to 3% of its global store footprint going forward.
There were a few bright spots for the chain in 2016. GameStop’s Technology Brands segment, which operates stores dedicated to specific technology brands, including its Simply Mac, Spring Mobile and Cricket Wireless stores, achieved its goal of delivering between $85 million and $100 million of adjusted operating earnings, hitting $90.2 million for the year, a 216.4% increase over 2015.
The company’s increasingly popular Collectibles business, known to shoppers’ as “Loot,” also achieved the high-end of its $450 million to $500 million revenue target, with sales increasing 59.5% to $494.1 million in fiscal 2016.
Expecting its Technology Brands and Collectibles to generate another year of strong growth, GameStop plans to open approximately 35 new Collectibles stores globally, and approximately 65 new Technology Brand stores. The company will also continue focusing on the promising “new hardware innovation in the video game category,” Raines said.