Cramer On Gamestop: The Old Narrative No Longer Applies

GameStop Corp. GME's stock plunged more than 10 percent and hit a new 52-week low of $20.10 after the company reported preliminary results for its third quarter and revised earnings per share guidance for the full fiscal year.

Jim Cramer offered his take on GameStop's decline.

Cramer noted that the old narrative to own shares of GameStop no longer applies today. Specifically, while consumers continue buying video games, as was evident in Electronic Arts Inc. EA's earnings results, they're no longer doing so in physical stores.

Cramer said consumers still do buy hardware and some of the gaming-related merchandise such as collectibles at GameStop's store, which offered investors a glimpse of hope that the retailer can successfully change its business model away from video game sales and into other categories.

On the contrary, GameStop's 6 percent same-store sales decline was worse than the 1 percent analysts were expecting.

"There are a lot of people who kept hoping that this thing would be revised upward," Cramer said. "Instead it went the other way. This is shocking."

Bottom line, GameStop's plan to better diversify "is not working."