GameStop plunges 10% after holiday sales were unexpectedly low

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GameStop

The holiday season is expected to be a major revenue driver for retail brands, with investors and analysts paying close attention to sales figures from this period as a sign of a company’s financial health. With profit margins being as tight as they are in the retail world, many companies operate in the red for most of the year only to end up swinging back into the green thanks to holiday shopping. However, it appears that at least one struggling retail brand has had a dismal holiday season.

GameStop (NYSE: GME) announced on Monday that it saw a startling decline in holiday sales, a terrible blow to a company that’s already been struggling. Since the beginning of 2019, shares of GameStop have fallen by around two-thirds as the company struggles to dial back its losses. As it turns out, same-store sales during the holiday period had fallen by over 25%, leading to a major selloff in the stock.

We expected a challenging sales environment for the holiday season as our customers continue to delay purchases ahead of anticipated console launches in late 2020. However, the accelerated decline in new hardware and software sales coming out of black Friday and throughout the month of December was well below our expectations, reflective of overall industry trends,” said CEO George Sherman. “Given the deceleration in sales trends, particularly in December, we are adjusting our sales outlook for fiscal 2019 and now expect fiscal 2019 earnings to be below guidance.

The retail industry as a whole continues to suffer as shoppers continue to migrate towards online e-commerce platforms such as Amazon rather than buying something in-store. While some more niche retail brands have avoided this fate due to the specific nature of their products, video game retailers have been among the hardest hit by this transition. Not only do platforms like Amazon compete with them, but dedicated online game platforms such as Steam mean that gamers have much more convenient options for buying a game rather than going in person.

Shares of GameStop ended up falling by 10% over the course of the day in light of this news. The vast majority of analysts covering the company remain negative on the business’s prospects for the reasons mentioned above. While the company’s new leadership could stage a turnaround in the years to come, this doesn’t seem particularly likely at the present time. Stay away from investing in this company until something major changes in how the business is run.

GameStop Company Profile

GameStop Corp is a U.S. multichannel video game, consumer electronics, and services retailer. The company operates across Europe, Canada, Australia, and the United States. GameStop sells new and second-hand video game hardware, physical and digital video game software, and video game accessories, mainly through GameStop, EB Games, and Micromania stores and international e-commerce sites, including www.gamestop.com, www.ebgames.com.au, and www.micromania.fr. The company has two main business segments: Video game brands and Technology brands. The technology brands segment sells wireless products and services and operates Spring Mobile managed AT&T and Cricket Wireless branded stores, along with the Simply Mac business. – Warrior Trading News

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