GameStop’s Slump

Published on: 05 Jun, 2019

GameStop (NYSE: GME) reported their first-quarter sales and earnings on June 4th, 2019. Their sales have fallen by 13% this quarter, which comes as no surprise with the growing popularity of streaming video games and downloading games on the internet. In a news release, GameStop also announced on June 4th, 2019, that it would stop paying quarterly dividends, in an effort to preserve profits and to eliminate outstanding debt. As a result, GameStop’s stock fell around 35% in premarket trading on Wednesday. GameStop says it expects its 2019 sales to fall between 5-10%.

Chief Financial Officer, Rob Lloyd, has a more optimistic view, explaining that consumers were postponing their purchase of consoles while waiting for newer generations of the PS4 and the Xbox. He adds that “The last time we experienced the console transition period (was) when Sony and Microsoft announced new generation consoles.” Unfortunately, with GameStop’s stock falling this much, along with the increased popularity in streaming and downloading games, GameStop isn’t looking too good. This, however, isn’t the first time GameStop’s stock has fallen. In late January, the stock plummeted after GameStop announced it would no longer plan to sell itself.

George Sherman, GameStop’s Chief Executive Officer, is confident that GameStop will bounce back. “We believe we will transform the business and shape the strategy for the GameStop of the future,” said Sherman, in a press release. “This will be driven by our go-forward leadership team that is now in place, a multi-year transformation effort underway, a commitment to focusing on the core elements of our business that are meaningful to our future, and a disciplined approach to capital allocation,” Sherman concludes that GameStop can still make a comeback, if it looks to focus more on what it has history succeeding with.

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Gordon Wang

Email: gordon@financialinsiders.com

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