It May Be “Game Over” For GameStop Soon

http://www.dailyfinance.com/2012/08/23/it-may-be-game-over-for-gamestop-soon/

By Rick Aristotle Munarriz, The Motley Fool

Posted 9:00AM 08/23/12 | AOL Original

Posted under: Earnings, Sony, Retail, Stocks in the News,Market News

 

It may not be long before GameStop (GME) becomes more Stop than Game.

The video game retailer is coming off another disappointing quarter. Sales plunged 11% to $1.55 billion, well short of the $1.61 billion that Wall Street was expecting. Same-store sales fell by a problematic 9.3%.

It gets worse.

Even the thrifty die-hard gamers are now staying away.

I’ll Give You $7 for That Old Super Mario Game

Video game sales have been sluggish for three years, but GameStop has survived on the strength of its resale business. The chain’s thousands of small-box stores will gladly take in your pre-owned games and gear in exchange for store credit or a little bit of cash.

GameStop then refurbishes the consoles, cleans the discs and cartridges, and sells them as discounted pre-owned items.

Gamers complain that the chain is ripping them off, and they’re probably right. GameStop offers so little in credit that even at marked-down resale price it’s where the chain scores its thickest profit margins.

Well, either consumers have caught on or they’re no longer interested in playing older games. Pre-owned sales fell by a whopping 11% in GameStop’s latest quarter.

There Isn’t Always an Option to Continue

This was supposed to be the last line of defense at GameStop. As software publishers and players embrace digital delivery, there isn’t necessarily a need for a physical retailer as a middleman.

Software companies won’t shed a tear for the demise of GameStop. Keep in mind that they only get paid on new releases. And developers and royalty-collecting console makers don’t collect any money on pre-owned sales.Gaming websites reported last year that Microsoft (MSFT) and Sony (SNE) were even considering either going all digital or incorporating features that would prevent secondhand games from playing on the new consoles that should hit the market within the next two years.

However, pre-owned sales were supposed to be resilient. Older games were supposed to have long shelf lives if the discounts were ample, and this business was supposed to continue thriving as penny-pinching gamers wax nostalgic.

Well, those days are apparently over.

It’s a Model in Flux

It was just three years ago that Activision Blizzard (ATVI) raised the bar — or at least the bar chord — with the release of Guitar Hero.

GameStop executives were even exploring ways to grow their store space to accommodate the plastic guitars and Rock Band drum kits that were all the rage.

Well, that rhythmic music craze died quickly. Activision Blizzard went on to ax the fake guitars, and GameStop went back to gamers who were starting to turn to smartphones and tablets as outlets for cheap casual and social games.

Obviously there’s no comparison between a $60 copy of Skyrim and a $0.99 Angry Birds app, but for mainstream audiences it’s been more than enough. There’s a reason that physical hardware and software sales in the video game industry have been freefalling since 2009.

Where does that leave GameStop?

With its high-margin resale business teetering, net income plunged 32% in its latest quarter. GameStop may point to its digital and mobile sales as growth markets, but those two categories added up to just 11% of GameStop’s sales this past quarter.Things seem to get worse with every passing quarter.

The Ever-Shrinking Small-Box Retailer

Back in March, GameStop was targeting positive comps of 1% to 5% for the entire fiscal year. Two months later the outlook for same-store sales was down to between flat and off by 5%. In last week’s report, GameStop’s eyeing comps to fall by as much as 10% this year.GameStop has a clean balance sheet. The stores are still profitable. It’s been buying back shares – sadly, at higher prices — to keep earnings on a per-share basis respectable.

However, this story doesn’t end well.

It’s been 10 months since my original “Why GameStop Will Never Be Great Again” article, and the stock has shed a quarter of its value. Even with a beefy dividend that was hiked last week, investors know that GameStop’s relevance is on a downward spiral.It was a good run, but the market’s ready to play a different game now.

 

Bye Bye John Deegan

John Deegan Teddy Nelsons buddy was fired from his position as North Market Vice President for GameStop a few months ago, I say good riddance, you protected Teddy Nelson from so many corporate investigations into his racism. John Deegan was fired because he ordered all the stores in his market to take down all displays form Max Payne and put up marketing for Call Of Duty. This was his idea, and when the representatives from Rockstar walked into Gamestop stores and saw that their marketing was not up, marketing they paid lots of money for they were furious!! Rockstar threatened GameStop with a huge lawsuit, so GS immediately distanced themselves from John Deegan and said it was all his idea and not the company and they fired him!!! Protecting Teddy Nelson did nothing for you John, and you probably took that Advice from Teddy Nelson and did not bring his name up thinking that GS would never fire you, but you learned the hard way didn’t you!!!!

Best Buy Heed The Advice

Best Buy if you want to succeed in the Pre-Owned or Used game business you have to change a few things in how you take care of your customers.

1. Stream Line the process, it takes way to long to get it done!!!

2. Hire more enthusiastic employees, best place to recruit employees is GameStop, just offer them more than the typical $7.50 an hour GameStop Does, also more than the average of $9.00 a key holder makes, the $11.00 average an Assistant makes and the typical $38,000 a store manager makes.

3. Make sure the employees helping the customer sell their games back are always customer service oriented and helpful.

4. Make sure the games are in working condition.

5. Make sure you offer many promo’s like GameStop does in fact always watch what Gamestop does and offer better trade in offers.

Teddy Nelson Part 6

Teddy Nelson is a undercover racist, he does not like anybody that is not African American, and he is an Regional Director for Gamestop. Teddy Nelson has been know to make his many District and Area Managers very uncomfortable. Teddy Nelson was once asked by one of his DM’s if he could apply for an open DM position is Philly because it was close to his home. Teddy responded to this DM by telling him that there is no way he would allow him apply for that position and that id he wanted to pursue the DM position that he would have to quit his position in his District and then go apply for the other position. Now the DM that wanted to try and get a position closer to his family was white. The DM spoke to Mike D at Gamestop corporate and because of John Deegan who was the VP stores at the time protected Teddy, the company did nothing to Teddy Nelson and to keep the DM quiet about what happened Gamestop gave him a raise, so to keep everything hush hush they increased the District Managers salary. Now why did Gamestop do that to avoid a potential lawsuit against Teddy and themselves. I shall keep that District Manager nameless for now..

GS Forces its People to Push Products or Else

So people when you go into your local GS it isn’t enough you are bombarded with the Reserve, Used Games, and Power Up Rewards speeches now you might get the I-Device speech, it is being forced on store managers to sell a used, I-pod, I-phone, or I-pad, every week or else you get put on the list. Now this could be a Teddy Nelson thing or could be a GS thing I don’t know, but I know it means more product pushing on every customer that walks into a GS store. If a store does not sell an I-Device for a week that store manager is called out and put on a list, if that store continues not to sell an I-Device that manager can get written up and eventually fired, whats that all about, talk about slave labor, I mean GS has become an uncontrollable monster that needs to eat dollars! A certain store manager even had to buy the I-Pod herself to get off the list and returned it the following week (Barbara Sherman). I think every manager at GS should make their own blogs and try to force the company to change its ways, or else their job is just going to get harder and harder, and they will get replaced one at a time with more effective brainwashed individuals!!!