With so many major stores going out of business the aphorism: “too big to fail” is turning into a joke. Online businesses are taking over the economy and store fronts are starting to contain too much overhead cost to match up with these online vendors. Gamestop has been a staple for all gamers since before Nintendo was released but now things seem to be declining for this major vendor as they fall behind in the digital retail world.
Gamestop experienced a decent increase in sales and profit following the release of the Nintendo Switch but that hype is over and things might be looking bleak. Their digital sales and game swag sales are going up but all other sales are likely to decline (including their most profitable: used games) But where does this leave Gamestop? can they make it through this transition? Well let’s analyze their recent company changes and figure out what might be coming next.
When all else fails, steal other people’s ideas
In June, 2015 Gamestop made a bold move to expand their horizons and acquire a company called Geeknet, Inc. in the hopes of attracting more customers and padding their stores with not only games but apparel, collectibles, and swag. They outbid Hot Topic to buy them out and ate the fees Geeknet paid to cancel Hot Topic’s contract. <For details information about this acquisition click here>
As a result of the Geeknet acquisition their sales increased by 23% in collectibles, however the company has also jumped into bed with some other, less profitable endeavors. Gamestop announced in the beginning of 2018 that they had lost a huge amount of money from their technology brands: Spring Mobile AT&T, Simply Mac, and Cricket. They released this loss in January with a giant tax write-off (profit loss). It looks like Gamestop made a big mistake and it is costing them dearly in a time where they really can’t afford it.
GameStop has built out this business partly through acquisitions as it attempted to diversify beyond games. But it’s now clear that the company paid too much for that diversification. It ended up taking a $358 million asset impairment charge and a $32.8 million goodwill impairment charge during the fourth quarter. That’s equivalent to more than five times the adjusted operating income for the technology brands business in 2017.
Timothy Green, The Motley Fool
It seems Gamestop is taking cues from Best Buy who just shut down all stand alone mobile phone stores. The sales of mobile phones are leveling off and maturing which is not good for the mobile phone industry or Gamestop.
Ok so they messed up… does that mean they are done for?
Maybe, but there are still other factors at play. In 2018 Gamestop has had a few executive tragedies: Veteran CEO Paul Raines died at the hands of cancer in March and CEO Michael Mauler resigned only a few months after taking the helm. I think it’s safe to say that Gamestop is feeling a little confused with the lack of solid management and any clear direction to where the company is heading.
With an interim CEO now running the show and others battling to get to the top, Gamestop is too busy with civil war to become a united front and delivery a solid plan for future. Probably as a direct result of this conflict, Gamestop announced that they are speaking to buyers who intend to acquire them. They go from the hunter to the hunted.
“While cautioning that no agreement is guaranteed, it’s the biggest acknowledgement yet that the company’s fortunes have turned as the industry it serves continues to evolve.” – CHRIS MORRIS – Fortune
While we can’t say for sure if Gamestop is shutting down, it seems more much likely that they will be selling their company which poses a lot of unknowns and questions of what is in store for them (literally and metaphorically). But nonetheless Gamestop is spiraling so you may want to spend your Gamestop gift cards. Stay tuned for more gaming articles
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