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One of the solutions many retailers have resorted to after struggling with lower profits due to fewer customers shipping at their stores, is to close locations. Sears, Walgreens, CVS, TGI Fridays, Foot Locker, Pizza Hut, Boston Market and Rite Aid are just a few of the many companies choosing this strategy. It's nothing new either. In 2020, GameStop shuttered over 400 stores, and now, it looks as though they are getting ready to do it again, but even bigger.
The news came out last week, when the company put out a press release instead of an earnings call. In the statement, they revealed that they are undergoing a "store portfolio optimization review" that will identify locations for closure. They noted that the review "may result in the closure of a larger number of stores than we have closed in the past few years." The decision comes after GameStop's Q2 net sales fell 31.4%, down to $798 million from $1.2 billion a year ago. While they were still profitable, with income of $14.8 million, they posted an operating loss of $22 million over the past three months.
While it seems GameStop will continue on, just with fewer stores, one analyst isn't so sure they should. Michael Pachter told Retail Dive that there are "insurmountable" growth challenges for the company, including the gaming industry's transition from physical to digital media, the growth of subscription services and GameStop's "total lack of any strategy to enter new categories with growth potential." He added, "While we admire GameStop's ability to manage operating losses, we think it would be just as reasonable for management to close all of its stores and operate as a bank."
GameStop doesn't seem worried about their future though. The press release goes on to say, "GameStop has many strengths and assets, including strong household brand recognition and a significant store network." The company plans to increase product availability and improve the customer service experience, among other things, to turn around their financial situation.
There is no word yet on when they will release a list of which of their 2,915 stores they plan to close.