Is GameStop Going Out of Business? (10 Things to Know)

Is GameStop closing? GameStop offers games, entertainment products, and technology through its eCommerce properties and stores. Here is all you need to know.

is game stop closing

GameStop Corp. is an American video game, consumer electronics, and gaming merchandise retailer.

The company is headquartered in Grapevine, Texas (a suburb of Dallas), and is the largest video game retailer worldwide.

As of 29 January 2022, the company operates 4,573 stores including 3,018 in the United States, 231 in Canada, 417 in Australia, and 907 in Europe under the GameStop, EB Games, EB Games Australia, Micromania-Zing, ThinkGeek, and Zing Pop Culture brands.

Is it too soon to declare GameStop to be officially dead? GameStop has been closing locations in startling numbers over the past year.

The business was established in Dallas in 1984 under the name Babbage’s, and it adopted its present name in 1999.

GameStop has finally reached the final quarter in which it must deal with the latter offender after several quarters of blaming ongoing sales declines on both COVID-19 and the end of the console generation.

Over 1,000 GameStop locations have closed by the end of the fiscal year, which ended on April 1, 2021, according to the company.

That means that after the holiday rush has passed, GameStop will close more locations in the next three months than they did in the previous two.

In the last few years, GameStop has closed hundreds of locations.

In 2020, they attributed at least some of those losses to the end of the console cycle and the concomitantly constrained availability of hardware and accessories, as well as to various game delays, an 11% decrease in its store base, and sales that were partially recovered online and at other locations.

Is GameStop Going Out of Business? (10 Things to Know)

is game stop closing

The positive operating update from the video game store was included in a third-quarter report that was otherwise nasty and revealed declining sales in the weeks before the recent debuts of two new platforms.

The management of GameStop stated in the results call with Wall Street investors that these hardware introductions should enable the retailer to report encouraging sales and profitability trends over the holiday season.

However, it’s still unclear whether the company will be able to constantly grow its customer base with this upcoming console generation.

The positive operating update from the video game store was included in a third-quarter report that was otherwise nasty and revealed declining sales in the weeks before the recent debuts of two new platforms.

The management of GameStop stated in the results call with Wall Street investors that these hardware introductions should enable the retailer to report encouraging sales and profitability trends over the holiday season.

However, it’s still unclear whether the company will be able to constantly grow its customer base with this upcoming console generation.

1. GameStop: What Happened, and What it Means

is game stop closing

GameStop is an American physical store with a focus on video games, consumer electronics, and gaming gear.

It was widely believed that the company was in poor condition; in fact, Wall Street considered its business model to be doomed to collapse simply because it still had a physical location.

The share price of GameStop, which had been in a long-term decline—falling from just below $50 at the beginning of 2014 to just $3 a year ago—only served to support this pessimistic outlook.

But was GameStop really a dying business?

Some online traders contend that it doesn’t matter at all.

GameStop’s share price increased during the fourth quarter of 2020 thanks in part to WallStreetBets, a group with a sizable following on the well-known social media discussion forum site Reddit.

The company’s stock was trading at roughly $20 at the end of the year. Wall Street was watching this comeback closely, including several sizable hedge funds.

However, they concluded from their study that GameStop was overvalued, so they started shorting its shares.

To put it another way, they borrowed the stock in order to sell it, hoping that the price would drop, at which time they would repurchase it and lock in huge profits.

2. One Good Month

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Due to strong demand for the new consoles, GameStop overcame pandemic-related store closures across Europe to report a sharp revenue comeback in November.

The comparable-store sales increased by 17%.

The chain had its best month in nearly two years, and it likely puts the business on track to report overall sales growth and favorable operating margins for its fiscal Q4, which spans from November through January.

The retailer is making a lot of effort to take advantage of this uptick and sustain it through 2021.

However, its larger goals continue to show a company that must change in order to survive in a market where video games are mostly bought and delivered online.

The good news is that GameStop still has a part to play in establishing connections between makers of video game hardware and software and their consumers through the selling of consoles and games.

The challenging thing now is creating a successful company around that job.

3. Slashing Costs

is game stop closing

The management sees the chance to accelerate its already aggressive cost-cutting effort in the burgeoning e-commerce business, where revenue increased by more than 200% in Q3.

GameStop is enthusiastic about the opportunity to move even more of its business into the online channel over the following few years, with 100 additional shops scheduled to close by the end of 2020.

It should have a chance to achieve sustained profitability thanks to that plan and inventory reductions, despite the reduction in its environmental footprint.

Though it has only begun, GameStop is working to streamline operations and refocus the company on its growth prospects.

“We will remain intensely focused on continuing to improve our financial architecture,” CFO Jim Bell added.

4. The No-Good Quarter

is game stop closing

Several detrimental factors that are simultaneously affecting the company’s operations can be blamed for GameStop’s shocking sales losses at its current stores.

These included the COVID-19 pandemic’s impact on customer traffic, supply chain problems, and the continued transition away from traditional video game disk purchases and toward digital downloads.

However, gamers’ refusal to spend money in the weeks before Sony and Microsoft’s system launches had the most impact.

The pressure on GameStop’s sales volumes during such generational shifts often peaks right before the new hardware hits the stores.

The accelerated collapse, which increased sales drops to 25% from 13% last quarter, was generally expected, according to management.

Sales and profitability were lower, as we had expected, according to Sherman.

5. GameStop and Hedge Fund

is game stop closing

A London-based hedge fund is closing its doors after losing money betting against US retailer GameStop during the initial meme stock rise in January.

According to persons familiar with the firm and a letter to investors, White Square Capital, managed by former Paulson & Co trader Florian Kronawitter, informed investors that it will close its primary fund and return capital this month following a review of its business strategy.

According to those acquainted with its betting strategy, White Square, which at its peak handled assets worth over $440 million, had bet against GameStop and lost by double digit percentages in January.

This action represents one of the first hedge fund closures brought on by the sharp increases in so-called meme stocks.

Retail investors drove up the price of equities like GameStop and movie theater operator AMC Entertainment in January and once again in recent weeks, frequently coordinating their activities on internet forums like Reddit’s r/WallStreetBets and in some cases purposefully targeting hedge fund short sellers.

For instance, GameStop saw an enormous increase from less than $20 at the beginning of the year to more than $480 at its highest point in January.

According to a source close to the fund, the decision to close had nothing to do with the viral stock rally.

Following the volatility in January, the fund soon recovered and recovered “a fair percentage” of the losses, the source claimed.

White Square claimed that despite the fund’s good performance the previous year, two significant investors decided to withdraw their money and invest it in low-cost passive funds or private equity.

White Square was expected to start receiving investor inflows once more in May of this year, but instead decided to close the fund.

6. GameStop Shutting Down ThinkGeek

is game stop closing

Though ThinkGeek is still around, its online store is now housed in a GameStop.com locker.

The separate ThinkGeek.com e-commerce site will be included into the GameStop.com website as of July 2.

In a separate ThinkGeek part of the GameStop website, a carefully chosen selection of goods previously seen on ThinkGeek.com will be offered.

The ThinkGeek store brand will continue after this closure.

The more than 40 ThinkGeek locations that are currently open in the US are being maintained by GameStop.

Additionally, there are a number of ThinkGeek products available at the more than 3,700 GameStop locations nationwide.

ThinkGeek is a retailer that focuses in “geek” culture-related collectibles, apparel, gifts, and other products.

All merchandise on the ThinkGeek.com website will be 50% off from now until July 2 close.

Due to the huge order volume, there may be severe shipment delays, according to a statement on the ThinkGeek website.

Orders placed before June 12 can be returned. Any sale made on June 13 or after is final.

Up to June 30, ThinkGeek will accept loyalty points from its Geek Points program.

After that date, any unused points will be converted into a GameStop email coupon that members will receive in July.

During the first quarter of fiscal 2019, GameStop reported a 13% decline in net sales.

For the entire fiscal year, GameStop expects negative sales growth and same-store sales growth of 5%–10%. The business is undergoing an extensive makeover.

7. GameStop Stock Surge

is game stop closing

For retail monarch GameStop, the inevitable transition from packaged video games to download is bad news, although you wouldn’t know it by looking at the company’s stock price right now.

The retailer of video games saw its shares rise from about $18 per share just a few weeks ago to as high as $247 during after-hours trading on Tuesday.

A game of brinksmanship between Wall Street firms and private investors, encouraged by forum members on Reddit, is nearly completely to blame for the increase.

The stock market drama, however, will almost definitely not have any impact on GameStop’s actual company when the dust settles.

No matter where GameStop’s stock price goes, according to experts, it will still be a failing vendor of boxed video games with a dim turnaround strategy.

That’s what initially makes this entire episode so weird.

8. A Basis for Growth

is game stop closing

The original growth of GameStop wasn’t wholly unrelated to reality.

The stock had been increasing slowly up until the beginning of this month as a result of a few minor recent achievements.

For instance, GameStop declared in October that it would use Microsoft’s cloud services for retail services like inventory management and checkout, and that it would provide Surface tablets to its staff.

As a condition of the agreement, Microsoft consented to split digital game sales for any consoles purchased via GameStop.

By eliminating some of its locations, GameStop has also reduced costs, and its recent sales have benefited from the introduction of new Xbox and PlayStation consoles in the fall.

Revenues for the 2020 holiday season were down 3.1%, but comparable store sales were up 4.8%.

The coronavirus epidemic hastened GameStop’s transition to online sales, which increased 309% over the holiday season.

9. Inflection Point

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A group of investors started urging other investors to short the stock because they believed it was overvalued, most notably Andrew Left of Citron Research.

That is, they would borrow shares from existing investors and sell them into the market at high prices, assuming they could purchase those shares back at reduced prices later and return them to investors at the original price, pocketing the difference.

Individual investors then retaliated by purchasing additional shares to drive stock prices even higher on websites like Reddit’s WallStreetBets forum.

Many short sellers experienced panic as a result, and some were compelled to reduce their losses and buy back their stocks at even higher prices, enabling them to be restored to the original investors.

The resulting demand has driven GameStop’s stock even higher. (Elon Musk’s tweet on the entire kerfuffle about Tuesday evening added to the spike.)

The majority of people claim that everything is simply “financial trolling,” which has gotten disconnected from any of GameStop’s actual economic prospects.

10. Picking Up the Pieces

is game stop closing

We anticipate that GameStop’s stock will eventually face a reckoning, probably following the release of the company’s upcoming earnings report in March.

When that occurs, GameStop will probably resume regular operations while attempting to develop a turnaround plan that relies less on selling actual game discs.

This is why GameStop has been promoting a “reboot” that includes shuttering some locations, reimagining others as social and cultural hubs, redesigning its online shopping interface, and working with partners on exclusive products.

But some analysts claim they haven’t yet seen anything from GameStop that would fundamentally overhaul the company, or at least those who aren’t investing in or shorting the stock.

Also, keep in mind that while GameStop has discussed making its stores cultural hotspots, those plans will undoubtedly be put on hold.

And it’s not obvious whether customers would buy more games as a result, even if GameStop could recast its stores as gathering places.

A large portion of GameStop’s initiatives still look experimental.

However, it may already be too late to diversify the company’s revenue away from physical sales.

GameStop will be best remembered as the material for a completely different game, not as a location to hang out and play games.

Conclusion

In several aspects, the GameStop stock trading incident that started in January 2021 was unique, particularly in the capacity of market players to plan group actions in an open but anonymous manner.

Other than that, it’s been a predictable replication of prior events.

Because of the various frictions and imperfections present in financial markets, it is difficult to create both legally binding agreements and sound public policy because of the unsatisfactory alignment of interests.

The GameStop incident lies at the core of numerous financial regulatory concerns.

Politicians and regulators responded in a flurry, making statements of concern, suggestions for new laws and regulations, and inquiries into possible wrongdoing.

All of these responses were laced with hostility directed at “market manipulation” and speculators, characterizing the financial markets as a “rigged game” or “casino.”

However, it is likely that the GameStop won’t be closing anytime in the nearest future.

CSN Team.

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