In the digital world, the physical retailer becomes the underdog.
A report on Markets Insider has revealed that video game retailer GameStop suffered from a massive drop in shares this past Wednesday after the company showed the public its quarterly report.
The 30% drop in shares, in total, could be explained by the dismal sales in the first quarter. Not only did GameStop’s quarterly earnings fall short of the expectations of various analysts, but it has also eliminated the cash dividend that it previously distributed each quarter. Out of the expected $1.64 billion, the company only made $1.55 billion in revenue.
What makes this worse is that this is not the first time that this happened to GameStop. The company also suffered from a disappointing fiscal quarter before this one. According to GameStop, this is due to the “consumers’ changing tastes around gaming,” as evidenced by the decline in hardware and software sales of video games, at least now that online streaming services are already starting to capture the market.
George Sherman, GameStop’s current CEO, said in a statement, “since joining GameStop in April, I have been undertaking a thorough review of the business and working closely with the team to improve our operational and financial performance, address the challenges that have impacted our results, and execute both deliberately and with urgency.”
Aside from the troubling quarterly report, some are also hesitant regarding the new management. One analyst, Mike Hickey, even reduced his target price from $9 to $5, saying, “The only impactful transformation we see in GME’s future is the industry’s ongoing transition to the digital economy, a viable scenario where GME has little value.”