The video game retailer, GameStop, announced on Tuesday that it has implemented workforce reductions as part of its cost-cutting measures, amidst facing lower fourth-quarter revenue.
The decline in revenue is attributed to increased competition from e-commerce giants and subdued consumer spending in an uncertain economic climate.
Shares of the Grapevine, Texas-based company plunged by 16% in after-hours trading following the announcement.
According to Wedbush Securities analyst Michael Pachter, the growing popularity of digital downloads has adversely affected physical retail sales. He emphasized that if consumers can conveniently download games online, there’s little incentive for them to visit brick-and-mortar stores. Pachter highlighted the necessity for GameStop’s management to devise strategies to drive foot traffic to their stores in order to revive revenues.
In addition to the job cuts, GameStop has also exited its operations in Ireland, Switzerland, and Austria as part of its recent cost-reduction efforts.
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 decline from the previous year, where it employed 11,000 full-time salaried and hourly employees and 14,000 to 27,000 part-time hourly employees.
Expenses for GameStop decreased by 21.2% to $357.1 million, primarily due to reduced labor costs, consulting fees, and marketing expenses.
Pachter expressed his belief that GameStop will continue trimming costs to achieve breakeven or better financial results. However, he cautioned that declining sales may eventually reach unsustainable levels for the company.
GameStop’s fourth-quarter revenue stood at $1.79 billion, down from $2.23 billion the previous year, with increased competition from Amazon adding to its challenges. Despite the revenue decrease, the company reported adjusted earnings per share of 22 cents, compared to 16 cents in the previous year.
Additionally, Daniel Moore has been promoted to the position of principal financial officer, a role he has been serving in on an interim basis since August.
