Gamestop shares drop by almost 39 percent

After releasing their financial results for the first quarter, Gamestop’s share price has experienced a significant drop. At the time of writing the company’s share price is $5.04, though yesterday it hit a low of $4.78, a drop of almost 39 percent.

Gamestop reported that their revenue had dropped by 13.3 percent. Even so the company still reported net profit, though it was significantly less compared to the same time last year. Gamestop’s full-year guidance hasn’t changed as a result of this week’s financial results, despite the results being significantly lower than analyst expectations for Gamestop.

For the company it was new hardware sales that took one of the biggest hits for the quarter, experiencing a drop of 35 percent. This result is even more poignant considering that Nintendo Switch sales were actually up for the period.

Collectibles was the only segment of Gamestop’s business to show significant growth. The segment was up by 10.5 percent year-on-year.

Outside of the financial results Gamestop also announced that they were eliminating the distribution of quarterly dividends to shareholders on a quarterly basis. The company estimates that this will help them save $157 million a year in cash, which should go some of the way to help offset losses experienced in a number of segments.

The low point of $4.78 per share was the lowest Gamestop’s shares have hit since 2003. At that point the company moved away from Barnes & Noble, and went through the process of acquiring their largest competitor, Electronics Boutique.

Gamestop has experienced a number of difficulties in recent years, with the position of CEO being temporarily filled several times over until earlier this year, when George Sherman took over the role.

As a physical games retailer Gamestop is experiencing the same challenges faced by many other retailers in the same market, such as Toys R Us. Similar companies such as UK retailer GAME have evolved to combat the changing market by diversifying their products. GAME has established a number of physical locations, Beyond Arenas, for people to come and play games on high-end PCs with their friends, and is even moving into the eSports market.

Gamestop has plans to take similar measures to survive in the changing market climate, the start of which can already be seen in the elimination of quarterly dividends distribution.