GameStop Bets Big on Next Gen Gaming

1 month ago 15
GameStop Bets Big on Next Gen Gaming

It’s official: the Xbox Series X|S and PlayStation 5 are due out this holiday season, and gamers know how much money they’ll need to pony up for Microsoft’s and Sony’s latest gaming consoles. And while of course those two have high hopes for their new tech, one company that is pinning much of their holiday sales on these consoles is GameStop.

GameStop’s financial and retail woes have been much documented in this column. The latest figures reflected another decline: Q2 figures for the period ending August 1st fell almost 27% compared to the same period last year. Revenue was below analysts’ expectations ($942 million versus just over $1 billion expected) and thus led to a loss higher than predicted ($1.40 versus $1.13 predicted).

Collectibles, which has often helped GameStop, fell by about 34% compared to a year ago.

Many of these declines are tied directly to the pandemic, as stores temporarily shut their doors, but this is also because of permanent closings that already took place. And speaking of closings, GameStop revealed that it is going to close about 100 more stores this year than previously announced, so between 400 and 450 locations.

GameStop

Not all news was bad news though. The sales decline was less than for both Q1 from this year and Q2 from last year. Online sales grew dramatically around the world, up 800%. And despite the fewer number of locations, about 40% of business from closed stores has moved to other GameStops or Gamestop.com. The company also has extra cash thanks to not restocking things once they sell. The stock price has been climbing the past few days, sending it up to over double it was a month ago — and even a year ago.

GameStop Stock Price 9/17/20Stock price on 9/17/20 via Yahoo Finance

Analysts upgraded GameStop’s stock value, and some high-profile investors purchased GameStop stock in recent weeks.

Why the sudden surge despite some bad news? Well, now the company, like other retailers, can now start accepting preorders for the new gaming consoles this holiday season. On November 10th, Microsoft’s new consoles will debut. The Series S will cost $299 and will be all-digital while the more powerful Series X will include a 4K Blu-ray disc drive for $499.

Just two days later, the PlayStation 5 will hit store shelves. A digital-only version will retail for $399.99 and a 4K Blu-ray disc drive version will cost $499.99.

Preorders for the PS5 began September 18th (although they went live a day early, causing issues) while Series X|S began September 22nd.

To try to encourage people to buy these consoles from them, GameStop has revealed customers will have several options to pay for their consoles. With these various payment plans (and subject to credit approval), gamers will have up to 12 months to pay off their new PlayStation or Xbox, or they can get 24 months for the Series X|S with the Xbox All Access plan. QuadPay is now available at stores and online, but rent-to-own is coming soon. Also, until November 30th, GameStop is offering up to $200 in credit toward the PS5 or Series X|S when people trade in their current gen consoles.

GameStop PS5/Series X|S Trade-In Offer

So GameStop is betting big on these systems. Another reason that’s important is that the Nintendo 3DS line has been discontinued. This means the handheld market is now limited to phone/tablet gaming — games that GameStop can’t really sell outside of in-game add-ons — and the Switch Lite, a device that’s $100 cheaper but takes away one of the Switch’s biggest features (being able to play on TV or in handheld mode). The end of the 3DS era — which previously was the Game Boy era — just once again shows the changing gaming market. Of course, that also means stores like GameStop are going to try to push the remaining stock, as this is likely much-wanted space for the new consoles from Nintendo’s rivals debuting this November.

While preorder numbers seem to be good, I also know that some people jump on preorders for hot-ticket items just in case — sometimes to resell, sometimes as a backup plan. And we’ll have to see if there are any supply chain snafus that prevent Microsoft and Sony from keeping up with demand. GameStop can offer all the promotions and payment options they want, but they can only sell as many consoles as they have available.

My own prediction is that gaming will be popular this holiday season, but it’s the post-New Year slump that could cause issues for GameStop again. After January, there are only a small handful of games on the release calendar for either system, so the hype will have dissipated a bit. Of course, there are a lot of unknown factors, like whether coronavirus outbreaks will cause new restrictions, the election, and whether bad weather prevents people from going out much. While all retailers are looking forward to any hot items to drive up sales in these uncertain times, GameStop probably has the most to gain — or lose.

Are you interested in either of these next-gen consoles? Will you buying them this year or do you plan on waiting? What would make you buy a PS5/Series X|S — or just more of your gaming and collectible purchases — at GameStop versus other outlets?
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