Videogame chain GameStop Corp., hit hard by a shift to digital downloads, plans to close at least 150 stores this year and expand non-gaming businesses.
Sales and earnings fell by double digits in the latest period, and the GameStop brand lost some market share during the holiday season due to discounts, Chief Executive J. Paul Raines said Thursday on a conference call.
Publishers, Raines said, started cutting prices earlier than expected, “leading to a steep decline in retail pricing.”
The retailer is betting on the latest generation of gaming consoles like Nintendo Co.’s Switch, which went on sale globally this month and in which GameStop sees the potential to generate the kind of sales that Nintendo’s popular Wii system did.
“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,” Raines said, referring to a Wall Street Journal article that Nintendo could double production of the console.
At the same time, the Texas company continues to expand beyond video game sales.
In 2008 GameStop relied entirely on store sales, Raines said. In the year that ended in January, its business other than physical video game sales accounted for 36.9 percent of adjusted operating earnings, up from 24.5 percent a year earlier, driving profit and gross margin expansion, he said.
Meanwhile, collectibles — one of GameStop’s success stories that is expected to become a $1 billion annual business by the end of 2019 — saw sales surge 59.5 percent in the year that just ended and are projected to increase another 30 percent to 40 percent this year, company officials said.
GameStop had 86 collectible stores as of Jan. 28 and plans to open an additional 35 such stores this year.
Shares, down 21 percent over the past 12 months, fell 12 percent to $21.19 in after-hours trading as results for the holiday quarter missed expectations.
On Thursday, the retailer said it would close 2 percent to 3 percent of its more than 7,500 stores around the world. While GameStop didn’t indicate where the closings would happen, the sales slump has been more pronounced in the U.S., where most of its stores are located and comparable sales fell 13.5 percent in the just-ended year, including a 20.8 percent drop during the holiday quarter.
GameStop defines comparable sales, a key metric for retailers, as sales at stores open for at least a year along with online sales.
The videogame chain has more than 50 locations in Colorado, according to the company website.
Overall, fourth-quarter profit fell 16 percent to $208.7 million, or $2.04 a share. Excluding store-closing costs and other items, profit slipped to $2.38 a share from $2.40 a year earlier.
Meanwhile, sales dropped 14 percent to $3.05 billion.
This financial year, GameStop expects to make $3.10 to $3.40 a share with sales ranging from a 2 percent decline to a 2 percent increase, compared with a projected $3.75 a share on a 0.67 percent revenue increase, according to Thomson Reuters.
The retailer expects comparable sales to range from flat to a 5 percent decline this year, compared with a 11 percent decline in the year ended in January and analysts’ projected 2.4 percent decline, according to FactSet.
On Thursday, GameStop officials said they would no longer offer quarterly financial projections to “reduce investor distraction” and focus on long-term targets.
