Is it Game Over for GameStop?

Gaming retail store Gamestop has released its fiscal report for the third quarter (ending on November 3) and the numbers do not look very good at all.  The 3rdfiscal quarter report shows Gamestop posted a net income loss of more than $488 million.

Looking more closely at the specifics, sales of pre-owned games and hardware are down 13.4 percent. This is unfortunate, of course, because pre-owned products is a major aspect of GameStop’s business.  What is fortunate, though, is that sales of new hardware were nearly 13 percent higher in the third quarter, especially for the latest generation video game consoles—the Microsoft Xbox One and the Sony PlayStation 4—with software sales also up nearly 11 percent.  In addition, accessories sales are also up, by a whopping 32.6 percent.

But even with all other metrics on the rise, GameStop still struggles, and that goes to show just how important pre-owned sales are to the company.

Still, GameStop’s Chief Operating Officer and Chief Financial Officer Rob Lloyd comments that compelling titles have contributed to software sales growth.  Recent titles like Marvel’s Spider-Man and Rockstar’s Red Dead Redemption 2 have piqued the interests of gamers across North America.  He also reports that NDP Group disclosed US physical video game sales grew by 46 percent in October alone, with the US physical video game revenue outpacing the rest of the industry to boost GameStop’s market share gains by 63 percent.

The term “physical video game sales” and “physical video game revenue” refer to physical games on discs as opposed to the same software you can download directly to your system.

All this in mind, then, GameStop has lowered their expectations for the fourth quarter.  In addition, the company now predicts hardware sales will be a much bigger focus than they had originally planned for the company. They had originally wanted to create a pre-owned marketplace environment, of course, but dipping sales in this area have resulted in big losses than they had anticipated.  It also appears that GameStop may be shifting towards dedicating more in-store shelf space to the collectibles market, which is also vastly on the rise, especially online.