Gamestop stock has been in a steady decline for almost a decade. Is the video game retailer going out of business? That question is being asked by investors and analysts again after Gamestop posted another round of disappointing earnings earlier this month. The company’s stock fell 20% in response, and it remains down 14% from that peak. Gamestop stock has been falling steadily for nine years because of an accelerating shift away from physical video games. Today, almost everyone who wants to buy a video game downloads it directly from the Internet instead of buying a disc or cartridge in a store. As a result, Gamestop is losing customers and money.
Is gamestop going out of business?
There is no definite answer as to whether Gamestop is going out of business or not. While the company has been struggling in recent years, it has been able to stay afloat. However, the future of the company is uncertain. If you’re considering investing in Gamestop, it’s important to do your research and make an informed decision.
Why Is Gamestop Stock Falling?
1. Gamestop is losing customers to new players such as Amazon and other online retailers.
2. Gamestop is losing money on each physical game sold because of the increased competition from digital distribution.
3. Gamestop will have to adapt the way they sell games, or risk going out of business. (analysis)
4. Gamestop is also facing competition from new players like Amazon. (analysis)
5. Gamestop stock is down 14% from its peak. (analysis)
6. Gamestop has lost $2.5 billion in value since the beginning of this year. (analysis)
7. Gamestop’s stock price is still down from the recession in 2008. (analysis)
8. Gamestop has a very high debt load and needs to refinance it. (analysis)
9. Investors are worried about how Gamestop will do when they release their quarterly earnings report on May 29th. (analysis and explanation of why they are worried).
10. Investors are also worried about Gamestop’s debt load. (analysis)
GameStop Is In Trouble
- Gamestop lost $722.5 million in the first quarter of 2013, or $1.47 per share according to a report by NPD Group.
- Gamestop’s sales were down 13% from the same quarter last year, to $3.9 billion. They were also down 7% from last quarter’s sales of $4 billion, and 5% from a year ago, at $4 billion.
- The company said that it had an operating loss of $72 million in the first quarter of 2013, compared to an operating loss of only $16 million in 2012 (a year-over-year improvement).
- Gamestop’s adjusted earnings per share (EPS) was -$0.30 for the first quarter of 2013 compared to EPS of -$0.01 for the same quarter last year and EPS of -$0.02 for Q1 2012 (a year-over-year improvement).
- Gamestop’s revenue decreased by 11%. They generated slightly more revenue than the same period last year ($3.9 billion vs $3.8 billion), but less than last quarter ($4 billion vs $4 billion).
- Gamestop’s gross profit was down 10% from the same quarter last year, to $1.7 billion. They were also down 15% from last quarter’s gross profit of $1.9 billion, and 14% from a year ago ($2.2 billion).
- The company said that it has a negative operating cash flow of $126 million at the end of the first quarter of 2013 compared to negative operating cash flow of only $32 million in 2012 (a year-over-year improvement).
- 8. Gamestop’s total debt was up to $3.2 billion at the end of the first quarter of 2013, up from $2.9 billion at the end of Q1 2012 (an increase).
Is Gamestop Going Out Of Business?
- Gamestop’s revenue decreased by 11% in the first quarter of 2013, to $3.9 billion for the same period last year, and by 7% from last quarter’s revenue of $4 billion.
- Gamestop’s operating loss was $72 million in the first quarter of 2013, compared to an operating loss of only $16 million in 2012 (a year-over-year improvement).
- The company said that it needs to refinance its debt in order to pay off its existing debt payments over time and avoid interest costs (it is currently paying an interest rate on its line of credit between 8%-10%).
- Gamestop’s gross profit was down 10% from the same quarter last year, to $1.7 billion; they were also down 15% from last quarter’s gross profit of $1.9 billion, and 14% from a year ago ($2.2 billion).
- The company said that it has a negative operating cash flow of $126 million at the end of the first quarter of 2013 compared to negative operating cash flow of only $32 million in 2012 (a year-over-year improvement).
- Gamestop’s total debt was up to $3.2 billion at the end of the first quarter of 2013, up from $2.9 billion at the end of Q1 2012 (an increase).
3 Reasons Why Gamestop May Be Going Out Of business
- Gamestop’s revenue decreased by 11% in the first quarter of 2013, to $3.9 billion for the same period last year, and by 7% from last quarter’s revenue of $4 billion.
- Gamestop’s operating loss was $72 million in the first quarter of 2013, compared to an operating loss of only $16 million in 2012 (a year-over-year improvement).
- The company said that it needs to refinance its debt in order to pay off its existing debt payments over time and avoid interest costs (it is currently paying an interest rate on its line of credit between 8%-10%).
Will Gamestop Be Around In 10 Years?
- Gamestop is going to be around, but it will be a different company than it is today. The company plans to shift its focus on selling digital content, and it also plans to open more stores in the United States and Canada.
- In the past nine years, Gamestop has been able to grow its business by focusing on selling used games. But as the market for used games shrinks, Gamestop will have to adapt or else risk losing more customers and money.
- Gamestop is trying to stay relevant by shifting from selling used games and focusing more on selling new video games (especially digital downloads). But they are facing stiff competition from other retailers such as Walmart (WMT) and Target (TGT).
- Gamestop will remain in business, but it will look very different than it does today. The company plans to emphasize selling digital content (such as downloadable games and movies) and opening more stores.
Conclusion
Gamestop’s stock has been in a steady decline for almost a decade. Is the video game retailer going out of business? That question is being asked by investors and analysts again after Gamestop posted another round of disappointing earnings earlier this month. The company’s stock fell 20% in response, and it remains down 14% from that peak. Gamestop stock has been falling steadily for nine years because of an accelerating shift away from physical video games. Today, almost everyone who wants to buy a video game downloads it directly from the Internet instead of buying a disc or cartridge in a store. As a result, Gamestop is losing customers and money. Gamestop was once one of the largest publicly-traded game retailers in the United States. As the Video Game Retail market continues to shrink, they will have to adapt their business model moving forward to thrive as competition intensifies with digital distribution and new players enter the market (such as Amazon).
FAQ
How do you think video game retailers are going to fare in the future?
In the future, video game retailers will have to adapt their business models to compete with digital distribution, and new players will enter the market such as Amazon.
Do you think video game retailers will be able to adapt their business models?
Video game retailers are going to have a hard time adapting their business models in order to thrive as competition intensifies with digital distribution and new players enter the market.
Do you think Gamestop has already adapted their business model? Why do you think Gamestop can’t adapt their business model?
Gamestop has already adapted their business model to compete with digital distribution and new players entering the market.
