Toy market news

GameStop loses credits as sales drop 30.2% in Q3

The Texas-based retailer of video games and lifestyle products reported third quarter earnings that missed the mark as overall net sales dropped 30.2% vs. the same period last year. The drop comes in tandem with record growth for the video game industry as more players from all age groups have gotten into the game during the continued spread of the COVID-19 pandemic. Same-store comp sales fell 24.6% during the same period that the U.S. video game industry grew 24%, according to The NPD Group. The bright spot is that GameStop’s digital sales grew 257%.

During the earnings statement and subsequent call with investors on Tuesday, GameStop CEO George Sherman continued to lean on its long-in-progress “transformation” into what it’s now calling “a frictionless digital ecosystem to position GameStop as a digital-first omnichannel retailer.”

While demand for new consoles is extreme, availability is low and traditionally, video game hardware is a low margin category that drives high sales at POS with little meat on the bone for the bottom line. By the end of this year, GameStop will have closed 1,000 stores since the company began what Sherman calls “the company’s optimization journey” in the middle of last year. Thus far, the company has been shoring up its balance sheet through cost-cutting measures and inventory reductions rather than building a loyal customer base.

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