On Tuesday, GameStop (GME) management released an ominous forecast for its 2019 fiscal year: a 5% to 10% decline in total sales. Yikes.
If I had to guess, that’s probably lowballing it.
Relative to its 2018 fiscal year results, GME’s new hardware sales declined 1.3%, new software sales declined 5.1%, and pre-owned sales declined 13.2%.
This doesn’t come as a huge surprise, as the brick-and-mortar company has been struggling to adapt to the evolving gaming industry. Discs are dying (if they’re not already dead). Why? Well, players can download games, add-ons, movies, apps, etc. at the touch of X or A, a level of access and immediacy that a physical store just can’t provide. Personally, I think the last time I bought a physical copy of a game was 2014. And I think that was a gift.
Plus, these online marketplaces have much less overhead and can offer much more attractive memberships and discounts.
Did GameStop make a mistake when it halted its search for a potential buyer? Maybe.
I’m not ready to write GameStop off just yet, though. Its current trajectory is downward, but this is still an $8 billion revenue-generating business. That doesn’t tank overnight.
GME has a mountainous climb ahead, but they’re not out of the game yet.