GameStop to shutter up to 225 stores

It’s not just clothing retailers: GameStop—the company that brought video game buy-back mainstream—is also falling upon hard times.

It recently announced that it will close 150 to 225 of its 7,500 stores following a major drop in sales.

The announcement was buried in a short paragraph in the company’s news release, entitled: “ GameStop Reports Sales and Earnings for Fiscal 2016 and Provides 2017Outlook”:

In 2017, the Company anticipates that it will open approximately 35 new Collectibles stores globally, and approximately 65 new Technology Brand stores. The Company also anticipates that it will close between 2% to 3% of its global store footprint.

The company reported a nearly 30 percent drop in hardware sales and close to 20 percent drop in software sales in the previous quarter, according to its most recent earnings statement. Overall, sales fell nearly 14 percent.

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In a jargon-laden statement containing terms such as “maximizing free cash flow” and “rationalizing our global store portfolio,” GameStop’s chief executive said the company is pivoting to focus on non-gaming sales:

Paul Raines, chief executive officer, stated, “GameStop’s transformation continued to take hold in 2016, as our non-gaming businesses drove gross margin expansion and significantly contributed to our profits. Meanwhile, the video game category was weak, particularly in the back half of 2016, as the console cycle ages. Looking at 2017, Technology Brands and Collectibles are expected to generate another year of strong growth, and new hardware innovation in the video game category looks promising. As we continue our transformation plan, we will also be focused on managing SG&A spend, rationalizing our global store portfolio, and maximizing free cash flow generation to drive shareholder value.”

The company faces increased threats from online retailers and brick-and-mortar competition.

The closures caused some reporters to wonder whether this signifies the end of brick-and-mortar video game stores. However, The Verge’s Andrew Liptak reported that the focus on collectibles seems to be a wise business and marketing move:

Despite ... those losses, there were some bright points, and GameStop appears to be pivoting to adjust. The company saw its sales rise by 27.8 percent when it came to collectibles, particularly with pokémon-related toys and apparel.

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