GameStop Loses $165 Million After Temporarily Closing More Than 3,000 Stores Due To COVID-19
The video game retailer's digital sales, however, increased by more than 500 percent.
Video game retailer GameStop has announced earnings for its first quarter ended May 2, and as expected, it was a tough period for the company. In total GameStop posted a loss of $165.7 million.
For comparison, during the same quarter last year, GameStop posted a profit of $6.8 million.
The poor results are due in part to the COVID-19 crisis. GameStop shut down all of its 3,526 stores in the United States; about 65 percent of these stores offered curbside pickup for orders. Internationally, Australia's GameStop-owned EB Games was a bright spot--stores never closed, and sales rose 35 percent.
Overall, total store sales worldwide fell by 30 percent (or 17 percent excluding those that closed).
With GameStop's physical locations closed or scaled back during the period, the retailer's digital business grew by a massive margin. Total e-commerce sales increased 519 percent compared to the same period last year.
"During this unprecedented time, our priority is focused on ensuring the safety and well-being of our employees, customers, and business partners as we continue the process of opening our stores as restrictions are lifted, in our ongoing effort to meet our customers' needs," GameStop CEO George Sherman said in a statement. "While we delivered a loss for the quarter in total, our performance included total sales just shy of our original expectations, even as stores closed due to the COVID-19 pandemic and key video game titles shifted to the second and third quarters, exacerbating the headwind from operating in the final stage of a console cycle."
Looking ahead, Sherman said GameStop is "cautiously and prudently navigating the near-term." The executive said GameStop is poised for success in the future thanks to the forthcoming releases of the PlayStation 5 and Xbox Series X, as well as new games for the systems.
In response to the COVID-19 crisis, Sherman took a 50 percent pay cut on his base salary, while CFO Jim Bell and the rest of the executive team reduced their pay by 30 percent. Additionally, all members of the board of directors--including Reggie Fils-Aime--had their pay slashed by 50 percent. GameStop also saved money during the period by offering employees a temporary furlough or reduced hours for less pay. Additionally, GameStop did not make some of its lease payments during the period as it negotiates deferrals or restructuring of rent payments during the crisis.
GameStop's fortunes are often tied to the console cycle, so--even without the COVID-19 crisis--the company would usually be in a softer period at the end of a console lifecycle. The launch of the PS5 and Xbox Series X will be important for the company as it looks to turn things around.
Sony and Microsoft have been drip-feeding information about their new consoles and games, and this will continue on June 11 with a big PS5 reveal event. After that, Microsoft will showcase more of the Xbox Series X and it games in July.