GameStop is suffering from a growing consumer trend

GameStop (GME) is facing major headwinds amid a most well-liked trend it truly is increasingly more eating away at its profits.

The retailer just reported in its second-quarter earnings report for 2024 that sales took a first-rate hit as more consumers are ditching physical games for ones that they are able to download digitally on online game consoles.

Related: Sony is struggling to sell a product that became once in high demand

The whole way through the report, GameStop revealed that its net sales all through the quarter dipped by about 31%, in comparison with the identical time period last year. Specifically, sales in hardware and accessories declined by about 24%, while software sales faced a much bigger decrease, declining by roughly forty seven%.

GameStop overall earned a gross profit of $248 million all through the quarter, which is determined a 19% decrease from what it earned all through the second quarter in 2023.

Since the earnings report's unlock, GameStop’s stock price has declined by about 18%, now selling for approximately $20 per share.

In a 10-Q filing with the U.S. Securities and Exchange Commission, filed on Sept. 10, GameStop warned that amid declining sales, it truly is a ways undergoing “a brand new phase of transformation,” in order that they are able to involve mass store closures in the near future.

“We have got got also initiated a comprehensive store portfolio optimization review, which involves identifying stores for closure based on many factors, including an evaluation of current market conditions and individual store performance,” said GameStop in the filing. “While this review is ongoing and a selected set of stores has no longer been identified for closure, we await that it will turn out in the closure of a much bigger variety of stores than now we have closed during the past few years.”

GameStop has around Four,100 stores worldwide, with around 2,915 of them based in the U. S..

As of last month, the Grapevine, Texas-based group employed 16,000 people globally, around 0.5 of them full-time.

Related: GameStop CEO mulls harsh decision after earnings surprise

GameStop warns of a first-rate change in consumer behavior

The grim report from GameStop comes after it revealed in a 10-K filing with the SEC in February that digital online game downloads have negatively impacted its business.

“Downloading of online game content to the current generation online game systems continues to grow and take an increasing percentage of new online game sales,” said GameStop in the ten-K filing. “If consumers’ preference for downloading online game content in lieu of physical software continues to amplify, our business and financial performance may possibly even be adversely impacted.”

More Retail:

• Macy’s store closures may unlock valuable real estate
• Target CEO addresses a growing problem in retail
• Latin America of americaa.'s version of Amazon is taking up e-retail

GameStop also revealed in the ten-K filing that it had cut thousands of employees from its personnel in order that they are able to “achieve profitability.”

As GameStop struggles, the web game industry continues to boom financially in the U.S. Per a recent analysis from professional services firm Pwc, gaming in the U.S. is regarded as the “fastest-growing large sectors” in the entertainment and media industry. %predicts that gaming revenue in the U.S. will reach $300 billion in 2028, which is more than double than what it generated in 2019.

Related: Veteran fund manager sees world of pain coming for stocks