GameStop’s Revenue Continues to Drop Sparking Fears of Bankruptcy

The growth in popularity for both digital downloads and online store giants such as amazon have been key factors in GameStop’s decline.

GameStop reported the largest quarterly revenue drop in two years. This shows that GameStop's efforts at increasing digital sales have not been enough to offset a decline of physical sales.

In the three months ending Oct 29, net sales dropped 8.5% to US$1.19 Billion (S$1.6 Billion), lower than two analysts' estimates of US$1.39Billion. The loss per share was 31%, which is worse than the 29 cent loss. The company is valued at US$7billion and is known for its volatile stock. Very few analysts have covered it.

GameStop was a symbol of the meme-stock craze, where retail traders inflated the prices of companies based on chatter on Reddit or other social media outlets rather than fundamental business information. After the report, shares fell by 40% this year. However, they fluctuated and rose about 1% in extended trading on Wednesday

Ryan Cohen joined GameStop's board last year and was made chairman. He has been trying to revive GameStop's growth, which has been slowing as more gamers switch from purchasing game discs to digital downloadings. GameStop's retail operations were halted by Covid-19 lockdowns, and the results have been further hindered by limited supply on consoles. According to NPD Group, the overall gaming industry is experiencing a decline with spending falling by 5% in the third quarter compared to a year ago.

Axios reported this week that GameStop has started a new round of job cuts. The focus was on the team responsible for building the company's Blockchain wallet. GameStop announced in July that it would be reducing a number of employees and firing Mike Recupero, its chief financial officer. GameStop did not mention job cuts in its earnings statements.

Cohen has been pushing GameStop to digital assets. But the strategy has proved difficult. The company announced a partnership in September with cryptocurrency exchange FTX USA as part of its efforts to move into non-fungible tokens. It was planned to work together on new ecommerce and online marketing strategies and to sell FTX gift card in selected stores. FTX filed Chapter 11 bankruptcy in November after it collapsed with US$9Billion of debts, causing the crypto market to spiral downwards.

Matt Furlong, chief executive officer of GameStop, stated that GameStop doesn't have a "material balance of any token". Furlong spoke to analysts during a conference call. He said, "We haven't and won't risk meaningful stockholder capital" in the space. He stated that he believes there is still a future in digital assets. BLOOMBERG