Enlarge /. Ah, for the carefree days when you plunged into a GameStop and couldn't worry about being a meter away from other buyers …
You might think that due to concerns about the novel corona virus, GameStop would be forced to close much of its global retail stores, which would be bad for the business. But CEO George Sherman said last night in a profit call that the retailer "has seen a surge in store and online traffic in the past few weeks" that could actually add to its profit.
"Although most of our European stores have closed in the past few weeks, increasing global demand for our products has resulted in positive, comparable sales results of 2% for the period from March to Saturday," GameStop CFO Jim Sagte Bell said during the call . "With millions of consumers adapting to remote work, games and learning, we're excited to meet their needs," added Sherman.
Although this is an impressive statistic at first glance, it looks somewhat weaker in context. For example, "Until Saturday" doesn't cover the time since GameStop finally decided to close all US stores (which make up the majority of its global retail space) for regular pedestrian traffic. "I think when all of this started, there was a pretty good demand that we saw when our stores were fully open, and that is the sales period that Jim speaks about when you speak until Saturday of last week," Sherman noted .
In the first weeks of March, Doom Eternal and Animal Crossing: New Horizons were also released, two highly anticipated games that could not keep up with similarly large March starts in 2019. Year-on-year sales could be viewed as relatively disappointing.
Even since normal operations in the United States ceased, Sherman said these stores "are still meeting the increased demand for our products through our roadside contactless delivery process, which we call door-to-door delivery." Most of these "curbside delivery" stores now operate with a single employee, Sherman said. Employees volunteer for shifts, "so it starts with a team member who wants to be there."
A tough year is coming
Aside from the precautions, GameStop looks for small signs of improvement after months and months of bad news well before the virus breaks out. This bad news continued into the company's last fiscal quarter (which ended on February 1). Comparable store sales fell by a whopping 26 percent in this crucial Christmas sales period and rounded off a decline of 19.4 percent for the entire fiscal year.
GameStop closed 320 of its more than 5,000 stores worldwide in 2019, and Sherman has announced that it will close at least as many stores in the next 12 months. However, he insisted on the call for results that this "consolidation" is part of a long-term plan that is not "related to recent business trends". These closures will result in "far more efficient and profitable businesses" as "we transfer sales to nearby businesses that will remain open," said Sherman.
GameStop, like the majority of American companies, suspends the formal profit forecast until the full economic impact of the corona virus is better known. Sherman said, however, that the company continues to see 2020 as a "transition year," the end result of which will not change until "a significant sequential improvement in console launch" occurs. And despite some early concerns among industry observers, Sherman said, "So far, we have no indication of any product launch or delivery date (for Xbox Series X and PlayStation 5) that is expected to arrive on 2020 holiday."
We are somewhat skeptical that these new consoles will be enough to strengthen the company in the long term. This could be particularly the case if extended coronavirus shelter-in-place orders get more players used to the idea of downloading new titles without having to leave the house.