GameStop Closing Stores After A Suprisingly Slow Holiday Season

by Nathan Birch

(Photo: GameStop on Twitter)

The 2016 holiday season should have been a great one for gaming. Sony launched both the PS4 Pro and the PlayStation VR headset, and numerous big games like Battlefield 1, Pokemon Sun and Moon, Final Fantasy XV, and Call of Duty: Infinite Warfare launched. Unfortunately, it seems gamers weren't buying. Or, at least they weren't buying at GameStop.

According to the video game retailer's fourth quarter financial report, hardware sales dropped 29.1 percent and new software sales declined 19.3 percent compared to 2015. Overall, total sales dropped 13.6 percent during the quarter. Unsurprisingly, the news caused GameStop's stock to plunge 13 percent on Friday.

So, what caused these sales shortfalls? According to GameStop, it wasn't weak product, it was tough competition from online and big box retailers like Amazon and Wallmart...

The fourth quarter [ended Jan. 28] was significantly impacted by aggressive console promotions by other retailers on Thanksgiving and Black Friday.”

You can't help but wonder if GameStop's much-criticized “Circle of Life” program that encouraged employees to focus on used sales over new hardware and software might have had a negative effect as well. It's hard to sell customers the hot new consoles and games on Black Friday when employees are afraid to push anything without a pre-owned sticker on it.

In the wake of the sales slump, GameStop will close at least 150 stores, with the possibility of more to come, as the company says it expects to shutter up to 3 percent of is 7,500 locations (which works out to around 225 stores). GameStop has had a stranglehold on the video game industry for years, but between the rise of digital sales and online retailers like Amazon, their grip may be weakening. While things aren't too dire for GameStop just yet, they'd better start adapting soon or it could be Game Over.

[via Fortune & CNBC]