GameStop faces an “unsustainable” decline in sales, and is cutting jobs to control costs

Written by Priyanka Ji and Harshita Mary Varghese

(Reuters) – Video game retailer GameStop said on Tuesday it was cutting an unspecified number of jobs to cut costs and reported lower fourth-quarter revenue amid growing competition from e-commerce companies and weak consumer spending in an uncertain economy.

Shares of the Grapevine, Texas-based company fell 16% in extended trading.

“The increasing mix of digital downloads is hurting retail, and there is simply no reason to go to a store if a consumer can just order a game and download it instantly,” said Michael Pachter, an analyst at Wedbush Securities.

“Revenues are unlikely to rebound unless management figures out a way to stimulate in-store traffic.”

US video game publishers Take-Two Interactive Software and Electronic Arts also posted lackluster profits last month as the gaming industry faces pressure from high borrowing costs, flat inflation and slowing demand from the height of the pandemic.

GameStop's recent cost-cutting measures have also included exiting its operations in Ireland, Switzerland and Austria.

As of February 3, the company had about 8,000 full-time salaried and hourly employees and between 13,000 and 18,000 part-time hourly employees worldwide. This compares to 11,000 full-time salaried and hourly employees and between 14,000 and 27,000 part-time hourly employees in 2023.

Its expenses decreased 21.2% to $357.1 million, primarily due to lower labor, consulting and marketing costs.

“I suspect they will continue to cut costs to break even or better, but their sales will inevitably fall to an unsustainable level,” Butcher said.

GameStop's fourth-quarter revenue of $1.79 billion was lower than last year's $2.23 billion, as it also faced stiff competition from Amazon.com and Ebay.

Adjusted earnings per share were 22 cents, compared to 16 cents a year earlier.

Separately, the company promoted Danielle Moore to chief financial officer. Moore assumed the position on an interim basis in August.

(Reporting by Harshita Mary Varghese and Priyanka G in Bengaluru; Editing by Devika Simnath)