On Friday, GameStop Corporation (NYSE: GME) showed no signs of an operational turnaround as it reported its fiscal first-quarter results earlier than expected. It was previously indicated that these would be published on June 11 after the market closed. The unexpected and dismal results came just hours before meme stock influencer Keith Gill, better known by the alias “Roaring Kitty,” held his first livestream in three years after helping spark a meme stock rally that attracted more than half a million viewers tuned in But even the return of Roaring Kitty couldn’t help GameStop’s play as its shares plummeted 40%.
Dismal first quarter results
For the period ended May 4, GameStop reported net sales fell 29% to $881.8 million, compared to FactSet estimates between $900 million and $1.09 billion. But GameStop narrowed its loss to $32.3 million after losing $50.5 million in the comparable quarter last year. An adjusted loss of $0.12 per share was also worse than Wall Street’s estimate of $0.09.
GameStop has scary competitors.
As a one-stop shop for video games, consumer electronics and gaming merchandise, the video game retailer pits itself against the mighty Amazon.com Inc (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), eBay Inc (NASDAQ: EBAY), Walmart (NYSE : WMT), Nintendo Co Ltd (OTC: NTDOY) and Best Buy Co Inc (NYSE: BBY). Amazon has an extensive delivery network and receives delivery orders quickly. Unsurprisingly, Amazon reported that its revenue more than tripled over the past five years, while GameStop’s fell in half. When it comes to online game sales, even with its efforts to shorten delivery times, GameStop can barely catch up to Amazon.
While Sony is GameStop’s B2B partner, it is also its B2C competitor as it sells video games directly to consumers. In May, Sony predicted lower sales of its PlayStation 5 console, which is in its fifth year. In addition, Sony aimed for lower overall revenue in its gaming division, but hoped that greater user engagement and more efficient cost control could boost the segment’s profitability. Along with Microsoft, which is also both a partner and competitor of GameStop, Sony announced layoffs in its gaming operations. Overall, Microsoft is doing well, but mainly thanks to the acquisition of Activision Blizzard, which secured its leading position in gaming. On Sunday, Microsoft will hold its annual video game showcase, with Xbox Game Pass taking center stage. Reuters reported that the software giant is preparing to roll out the latest installment of its best-selling “Call of Duty” franchise on the subscription service in response to stiff competition from Sony and its consoles. With this move, Microsoft expects to boost the growth of its subscription service. In February, Microsoft reported that its subscription service had 34 million subscribers.
What is certain is that even the video game industry is changing.
But the video game industry, which combines the technology and media industries, is seeing revenue declines while usage declines and layoffs increase in response to looming AI automation. In 2021, GameStop was a struggling video game retailer in an environment where digital downloads were quickly starting to replace discs. Three years later, the company is seeing lower sales across hardware, accessories, software and collectibles, while once again being a struggling brick-and-mortar video game retailer.
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