Despite pandemic and its reboot, GameStop says it's ready for next-gen demand

GameStop's earnings are still down yoy, but its CEO says an increase in e-commerce sales and sizable reduction in Selling, General and Administrative Expenses indicates things are proceeding as planned. 

As the industry approaches a new console generation, GameStop CEO George Sherman says that he believes GameStop is better-positioned to deal with the demands that might bring to the retailer. 

“While the ongoing pandemic continues to create a somewhat uncertain environment in the short term, we are very pleased by the consumer response at GameStop to the few recent video game product introductions and we believe we are ready, with expanded service and payment options, to handle the expected surge in demand and participate in a very significant way in the console launches later this year," reads a statement from the GameStop head.

The retailer's earnings are still down year-over-year, but Sherman says an increase in e-commerce sales and sizable reduction in Selling, General and Administrative Expenses indicates things are proceeding as planned, both in the larger scheme of things and for its ongoing reboot effort. 

Net sales for the three month period ending August 1, 2020 came in at $942 million for GameStop, down 26.7 percent year-over-year and complicated somewhat, according to GameStop, by the impending new console launches and store closures, either temporary due to COVID-19 or permanent due to its “optimization” plans.

As with last year, the bulk of those sales came from hardware and accessories, followed by software, and then collectibles. For Q2, GameStop reported $441.6 million in sales from hardware and accessories, both new and used, which is right around 46.9 percent of the quarter’s net sales. Software brought in $386.5 million, but took the largest hit year-over year, falling from last year’s $558.3 million.

Pre-pandemic, GameStop started down a path to reboot the organization and, while those efforts have been complicated by current affairs, that effort continues on. GameStop notes in its quarterly reporting that its latest strides on this front include a $133.7 million reduction in its SG&A category (covering things like rent, travel, and management salaries) and savings from a 10 percent reduction of its retail presence which, in turn, drove 40 percent of closed store traffic either online or to nearby locations.

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