The company announced earlier this week that it would be shutting down 2% to 3% of its brick and mortar locations. This could mean upwards of 190 stores could be on the chopping block in this cost-cutting move.
GameStop (GME 22,22 -1,40 -5,93%) currently operates more than 7,000 locations globally, with close to 4,400 locations located in the United States. It has yet to announced what locations will be closing, and if these places would be abroad or US based sites.
The retailer has been having a difficult time this last year, with the stock taking a beating, dropping more than 31%. With the growing reliance on digital sales on the PlayStation 4 and Xbox One Platforms, it is no wonder sales at GameStop dropped 13.6% in 2016 compared to previous years.
Not all was bleak for GameStop; their collectables division has shown significant growth in 2016, with sales up 59.2 percent. GameStop expects the sales to grow another 30 to 40 percent over the course of this year. With more people jumping into the world of gaming, even if they are not buying physical games, the ability to purchase a collectable from the game they love is still ever present. With these offerings readily available at most GameStop locations, it gives easy access to a wide range of memorabilia people can buy for themselves or as gifts for loved ones.
This is not the end of the gaming business for GameStop though. With the launch of the Nintendo Switch, there could be a reinvigoration of the game buying public. In a statement to the WSJ, Chief Executive J. Paul Raines stated that “The Switch has provided a dramatic lift in traffic in stores and has real potential to be Wii-like in its ability to expand the gaming category from core to broad audiences.” While the Nintendo Switch is one of the fastest selling consoles to date, with Nintendo doubling production to 16 million units for 2017, it is unclear is these new buyers will embrace the digital download world as many buyers of other consoles currently on the market.
For the near future, it seems GameStop will no longer publish quarterly financial projections to try and “reduce investor distraction.” With many retail stores struggling against online giants such as Amazon, it will be interesting to see how the company evolves to adapt to the changing times.