GameStop Is Still Struggling, Says Anticipation For Xbox Series X And PS5 Is Hurting Sales

Video game retailer GameStop continues to struggle. The Texas-based company announced earnings for its fiscal third quarter ended November 2, and the results were less than great, with revenue falling overall and sales decreasing across nearly every category of the company's business

Total revenue fell by 25.7 percent to $1.4 billion. In terms of specific results, new hardware sales dropped by 45.8 percent, a significant downturn that GameStop management said was due in part to the anticipation for the PlayStation 5 and Xbox Scarlett in Holiday 2020. Given the consoles (including the newly named Xbox Series X) are still about a year away from release, GameStop said it expects hardware sales to continue to slide in future quarters.

Revenue from new game sales, meanwhile, dropped by 32.6 percent. Game sales for Nintendo Switch grew year-over-year, but this success was not enough to offset the category. Gamestop said this fiscal quarter had "weaker title launches" at GameStop this quarter compared to last year.

The video game industry is increasingly moving toward digital, so it makes sense that GameStop's physical sales business would suffer as a result. As evidence of this, 2K announced earlier this year that Borderlands 3 sold 70 percent of its launch copies digitally, which is the highest-ever digital percentage for any 2K game. Another massive 2019 game, Madden NFL 20, sold more than 50 percent of its launch-week copies digitally. It was the first time in franchise history that launch-week sales surpassed a 50 percent share for digital.

All of this spells trouble for GameStop, which relies on physical media not just for initial game sales, but also as part of its all-important secondhand business. That pre-owned business for GameStop fell 13.3 percent during the quarter; hardware and software both experienced drop-offs in sales.

Moving along, GameStop's accessories category saw its sales fall by 13.4 percent. The only category at GameStop that grew during the quarter was Collectibles, which improved by 4.3 percent.

In total, GameStop posted a loss of $83.4 million for the quarter. That's a big loss, but it's actually much better than the net loss of $488.6 million during the same period last year.

GameStop CEO George Sherman said other companies are struggling as well with new hardware sales as the current generation of consoles comes to an end. The thinking is that consumers are holding off on buying new consoles because next-generation systems are coming.