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GameStop sees 'unsustainable' revenue drop, slashes positions to reduce expenses

GameStop logo is displayed in this image shot February 2, 2021.

March 26 (mod1s) - Videogame retailer GameStop (GME.N), opens new tab said on Tuesday it has lost an undefined number of positions to reduce costs and reported lower fourth-quarter sales amid increased competition from e-commerce businesses and sluggish consumer spending in an uncertain economy.

Shares of the Grapevine, Texas-based firm plummeted 16% in extended session.

"An increasing mix of digital downloads is hurting physical retail, and there is simply no reason to go to the store if a consumer can just order a game and download it immediately," Wedbush Securities analyst Michael Pachter said.

"Revenues are highly unlikely to rebound unless management figures out a way to drive store traffic."
U.S. videogame producers Take-Two Interactive Software (TTWO.O), opens new tab and Electronic Arts (EA.O), opens new tab also announced poor results last month as the gaming industry confronts pressure from high financing costs, stubborn inflation and a decline in demand from pandemic peaks.

GameStop's recent cost-reduction efforts also included a withdrawal from its businesses in Ireland, Switzerland and Austria.

As of Feb. 3, the firm employed roughly 8,000 full-time paid and hourly colleagues and between 13,000 and 18,000 part-time, hourly associates globally. That compared to 11,000 full-time paid and hourly workers and between 14,000 and 27,000 part-time hourly employees in 2023.

Its expenditures declined 21.2% to $357.1 million, mostly owing to reduced costs of personnel, consulting services and marketing.

"I suspect that they will keep trimming costs to generate breakeven or better, but it is inevitable that their sales will decline to an unsustainable level," Pachter said.

GameStop's fourth-quarter sales of $1.79 billion was lower than last year's $2.23 billion, as it also faced with intense competition from (AMZN.O), opens new browser and Ebay (EBAY.O), opens new tab.

It posted adjusted profits per share of 22 cents, up with 16 cents a year earlier.

Separately, the business appointed Daniel Moore to principal financial officer. Moore had taken up the post on an interim basis in August.

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