GameStop faces 'unsustainable' sales decline, cuts jobs to control costs

FILE PHOTO: GameStop logo is seen in this illustration

By Priyanka G and Harshita Mary Varghese

(Reuters) -Videogame retailer GameStop said on Tuesday it had cut an unspecified number of jobs to reduce costs and reported lower fourth-quarter revenue amid rising competition from e-commerce firms and weak consumer spending in an uncertain economy.

Shares of the Grapevine, Texas-based company tumbled 16% in extended trade.

"An increasing mix of digital downloads is hurting physical retail, and there is simply no reason to go to the store if a consumer can just order a game and download it immediately," Wedbush Securities analyst Michael Pachter said.

"Revenues are highly unlikely to rebound unless management figures out a way to drive store traffic."

U.S. videogame publishers Take-Two Interactive Software and Electronic Arts also delivered lackluster earnings last month as the gaming industry faces pressure from high borrowing costs, sticky inflation and a slowdown in demand from pandemic peaks.

GameStop's recent cost-reduction measures also included an exit from its operations in Ireland, Switzerland and Austria.

As of Feb. 3, the company had about 8,000 full-time salaried and hourly associates and between 13,000 and 18,000 part-time, hourly associates worldwide. That compares to 11,000 full-time salaried and hourly employees and between 14,000 and 27,000 part-time hourly employees in 2023.

Its expenses fell 21.2% to $357.1 million, primarily due to lower costs of labor, consulting services and marketing.

"I suspect that they will keep trimming costs to generate breakeven or better, but it is inevitable that their sales will decline to an unsustainable level," Pachter said.

GameStop's fourth-quarter revenue of $1.79 billion was lower than last year's $2.23 billion, as it also grappled with stiff competition from and Ebay.

It reported adjusted earnings per share of 22 cents, compared with 16 cents a year earlier.

Separately, the company promoted Daniel Moore to principal financial officer. Moore had taken over the role on an interim basis in August.

(Reporting by Harshita Mary Varghese and Priyanka.G in Bengaluru; Editing by Devika Syamnath)