GameStop's Dismal Results Fail To Show Signs Of A Turnaround

On Friday, GameStop Corporation GME failed to show signs of an operational turnaround as it delivered its fiscal first quarter results earlier than expected, previously saying they will be issued on June 11thafter market close. The unexpected and dismal results only hours before meme-stock influencer Keith Gill, better known under an alias “Roaring Kitty”, held its first livestream in three years after helping ignite a meme stock rally, to which more than half a million viewers tuned in. But even Roaring Kitty's return couldn't help GameStop's game with its stock plunging 40%.

Dismal first quarter results

For the period ended on May 4th, GameStop reported net sales dropped 29% to $881.8 million, while FactSet estimates were between $900 million and $1.09 billion. But GameStop did narrow its loss to $32.3 million after losing $50.5 million in last year’s comparable quarter. An adjusted loss of $0.12 per share was also worse than Wall Street’s estimate of $0.09.

GameStop has scary competitors.

Being a one-stop-shop for video games, consumer electronics, and gaming merchandise places the videogame retailer against the mighty Amazon.com Inc AMZN, Microsoft Corporation MSFT, eBay Inc EBAY, Walmart WMT, Nintendo Co Ltd NTDOY and Best Buy Co Inc BBY. Amazon has an extensive delivery network and gets delivery orders quickly. Unsurprisingly, Amazon reported its revenue more than tripled over the past five years while GameStop’s was halved. When it comes to online game sales, even with its efforts to shorten delivery times, GameStop can hardly catch up to Amazon. 

Although Sony is GameStop’s B2B partner, it is also its B2C competitor as it sells video games directly to consumers. Back in May, Sony forecasted lower sales of its PlayStation 5 console that is in its fifth year. Moreover, Sony guided for lower overall revenue at its gaming unit, but hoping greater user engagement and more efficient cost control could fuel the segment’s profitability. Along with Microsoft, who is also both a partner and competitor to GameStop, Sony announced layoffs across its gaming business. Overall, Microsoft is fine but mostly thanks to its Activision Blizzard acquisition with which it ensured its leadership position in the gaming arena. On Sunday, Microsoft will hold its annual video-game showcase with Xbox Game Pass taking center stage. Reuters reported that the software giant prepares to roll out the latest installment in its best-selling "Call of Duty" franchise on the subscription service in response to heavy competition from Sony and its consoles. With this move, Microsoft expects to boost the growth of its subscription service. Back in February, Microsoft reported its subscription service had 34 million subscribers.

What is certain is that even the video game industry is changing.

But the video game industry that blends the tech and media industries is seeing sales going down with lowered usage and layoffs increasing in response to the looming AI automation. Back in 2021, GameStop was a struggling video game retailer in an environment where digital downloads quickly started replacing discs. Three years later, it’s seeing lower sales for hardware, accessories, software and collectibles, again being a struggling brick and mortar video game retailer.

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