GameStop Had $25 Million In COVID-19 Expenses Last Year, And It Expects More To Come

The COVID-19 pandemic has impacted many companies, and now video game retailer GameStop has revealed exactly how much money it has spent to address the pandemic. In its latest earnings report, GameStop revealed that it incurred about $25 million in costs to mitigate the impact of the pandemic.

These costs includes incremental wage payments to hourly associates who could not go to work due to store closures, while GameStop also spent money on "enhanced cleaning measures," along with the expanded use of personal protective equipment at its stores, service centers, and distribution sites around the world.

"In response to the COVID-19 pandemic, we prioritized the health and safety of our associates and implemented significant changes that we determined were in the best interests of our associates as well as the communities in which we operate," GameStop said.

GameStop's corporate employees were encouraged to work from home, while those who had to go into the office to complete "critical on-site work" did so with the new health and safety measures in place.

GameStop said it expects to continue to incur pandemic-related costs into the current fiscal year, though it did not provide a specific number for how much money it would be. While vaccines are indeed becoming more widely available in the US and around the world, many agree it will be some time before the world goes back to "normal."

Also in the release, GameStop spoke about how the pandemic might continue to impact the company's business performance, which is to say--it certainly will have a negative impact.

"The COVID-19 pandemic has had and is expected to continue to have an adverse effect on our business and financial performance," GameStop said. "The extent of the impact of the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted."

In response to the pandemic, GameStop has closed a number of stores and or operated them at reduced hours, and this could continue to have an impact on the company's value.

"Concerns have rapidly grown regarding the COVID-19 pandemic. Consumer fears about exposure to the coronavirus may continue, which will adversely affect traffic to our stores," GameStop said. "Consumer spending generally may also be negatively impacted by general macroeconomic conditions and consumer confidence, including the impacts of any recession, resulting from the COVID-19 pandemic or other economic events. This may negatively impact sales at our stores and on our websites. Any reduction in customer visits to our stores, and/or spending at our stores or on our websites, will likely result in a loss of sales and profits and other material adverse effects."

GameStop also warned that the pandemic could impact supply chains, while its leases for its physical stores are another unanswered question. GameStop said it is trying to negotiate with landlords to defer or terminate some leases due to the pandemic, but doing so could subject the company to legal, reputational, and financial risks. "We can provide no assurances that any rent deferrals or abatements will be provided to us," GameStop said.

The retailer said it is unable to concretely predict what will happen in the future because, as everyone knows, the future is difficult to predict, especially with a rapidly evolving situation like this. "We cannot reasonably estimate the full extent of the COVID-19 pandemic's impact on our business and financial results," it said.

Finally, GameStop said the pandemic-triggered surge in digital game sales could have a negative impact on GameStop's business, which remains rooted in physical games and content. GameStop acknowledged that the digital share of game sales is rising, and as a result of the quarantine protocols, "consumers may increasingly download video game content." In turn, this could lead to GameStop missing out on even more sales.

"If consumers' preference for downloading video game content continues to increase or these consoles and other advances in technology continue to expand our customers' ability to access and download the current format of video games and incremental content for their games through these and other sources, our customers may no longer choose to purchase video games in our stores or reduce their purchases in favor of other forms of game delivery," GameStop said. "As a result, our business and results of operations may be negatively impacted."

All of this information was presented in the "risks and uncertainties" section of GameStop's filing with the SEC. It sounds dramatic, but it's actually fairly standard practice for major publicly traded companies to list off what sound like possible serious negative consequences that may or may not come to be.

GameStop's latest earnings report showed a slight drop in revenue for the year, which some might have been surprised to see given the hype around GameStop's share price. But the stock market and actual business performance are not always connected.

GameStop said as much in its latest earnings report. "Stock markets in general and our stock price in particular have recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies and our company," the retailer said.

During the wild stock price swings that began in January, GameStop said it had not "experienced any material changes in our financial condition or results of operations that would explain such price volatility or trading volume."

In other news, GameStop's existing board of directors is getting a shakeup this year, with former Nintendo of America president Reggie Fils-Aime and others headed out.