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GameStop Stock and Sales Plummet Following Poor Christmas Season, Is the End Near?


GameStop Stock and Sales Plummet Following Poor Christmas Season, Is the End Near?

Things continue to look ugly for GameStop heading into 2020, as the company has seen steep declines in sales, resulting in massive declines in its stock as well. The holiday season was expected to be a bright spot for the video game retailer. Unfortunately, they saw a 27.5 percent decrease in holiday sales for 2019, compared to 2018. Wall Street hasn't responded kindly to the news and one has to wonder, is the end near?

As far as cold hard numbers go, GameStop saw $1.83 billion in global sales during the 2019 holiday period. Given the lackluster performance, the company altered its 2019 projections, saying they expect a 19 to 21 percent decline in sales for fiscal 2019. George Sherman, GameStop's chief executive officer had this to say in a statement.

"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. On a positive note, we continued to see growth in the Nintendo Switch platform, which supports our view that our sales will strengthen as new consoles and innovative technology are introduced."

Indeed, the gaming industry is in a transitional period in many ways. For one, the Nintendo Switch is the newest major console on the market, but it hit shelves nearly three years ago. Meanwhile, the Xbox One was released in November 2013, right alongside Sony's PlayStation 4. Sony and Microsoft are set to unveil new consoles this holiday season, with the Xbox Series X and PlayStation 5 on the way.

GameStop expects that the arrival of these new consoles will help boost sales. While that may be true, the long-term problems go beyond hardware. Sales of digital games have been increasing in recent years, as have video game subscription services, such as Xbox Game Pass. With that, fewer consumers feel the need to make the trip to an actual store to buy a physical game these days. Speaking further, George Sherman had this to add.

"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. While we expect the challenges that we faced in the fourth quarter to continue into fiscal 2020, we believe we have the right long-term action plans in place to optimize profitability and increase new revenue streams in advance of new console introductions for holiday 2020. We look forward to delivering progress against our strategy as we move through the year."

Overall, GameStop's stock is down nearly 70 percent year-over-year. The company has been closing stores and issuing layoffs as a result of the downturn in business. If they can't find a way to turn things around in a hurry, this could be one of the next major chains facing extinction in the digital age. This news comes to us directly from Gamestop.


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