On Wednesday GameStop Corp (NYSE:GME) stock tanked after the struggling video retailer indicated that it would be closing down stores to offset waning sales.
GameStop to shut up to 200 of its stores globally
The company is planning to close around 180, and 200 stores of it’s close to 5,830 stores worldwide before the end of FY2019. The shutting down of the stores is part of the company’s wider strategy to review the store footprint that could see it close more stores.
The stock dropped 10% on Wednesday, and it has plunged 63% since the beginning of the year. GameStop stock had plunged around 71% in the past 12 months.
In a conference call to analysts, finance Chief James Bell indicated that the process of shutting down the store could take around one to two years as the company focuses more on its footprint. He said that the company had a clear opportunity to enhance profitability through de-densifying of the chain.
CEO George Sherman, in an earning call, indicated that the optimization of the company’s store base for an increasingly digital world is vital for the chain’s future and enhancing profitability. He also said that the chain has a chance of doing better and becoming profitable through the reduction of stores in specific markets. He confirmed that the average lease life of a store is around two years, and the company will do everything to limit cost implications.
Uninspiring second-quarter results
On Tuesday the company reported a 14% drop in sales in the second quarter to $1.29 billion which is short of the $1.34 billion that Wall Street analysts predicted. The video game retailer is under pressure from investors to improve its performance following a sale process that backfired.
The company has to contend with increasing competition in the gaming and esports world. GameStop hopes to make its stores experience and a place they can hang out. The CEO indicated that they are creating a social and cultural hub within each store, online, and in the digital sphere.