Videogame retailer GameStop revealed on Tuesday its decision to reduce its workforce to lower expenses, citing decreased fourth-quarter revenue amid intensified competition from online retailers and subdued consumer spending in an uncertain economic climate.
Following the announcement, the company’s shares plummeted by 16% in extended trading.
Analyst Michael Pachter from Wedbush Securities attributed the decline in revenue partly to the growing prevalence of digital downloads, which diminishes the appeal of physical retail outlets.
He emphasized the urgent need for strategies to drive foot traffic to stores to mitigate the impact of shifting consumer preferences.
The broader gaming industry has experienced lackluster earnings, as evidenced by disappointing results from U.S. videogame publishers Take-Two Interactive Software and Electronic Arts.
High borrowing costs, persistent inflation, and a decline in demand from pandemic-induced peaks have all contributed to the industry’s challenges.
In addition to job cuts, GameStop has streamlined its operations by withdrawing from markets in Ireland, Switzerland, and Austria. As of February 3, the company employed approximately 8,000 full-time salaried and hourly associates, along with 13,000 to 18,000 part-time, hourly associates worldwide.
This marks a decrease from the 2023 figures, indicating the extent of the company’s restructuring efforts.
Expenses declined by 21.2% to $357.1 million, primarily driven by reductions in labor, consulting services, and marketing costs. Analysts anticipate further cost-cutting measures as GameStop strives to achieve breakeven or better financial results.
Despite these efforts, GameStop’s fourth-quarter revenue fell to $1.79 billion from $2.23 billion the previous year. The company reported adjusted earnings per share of 22 cents, compared to 16 cents in the prior year.
Daniel Moore has been promoted to principal financial officer, a role he has been fulfilling on an interim basis since August.
This move reflects GameStop’s commitment to enhancing its financial management amidst challenging market conditions.