GameStop Plummets as CEO Expects Store Network to Downsize

On Monday, GameStop’s shares experienced a dramatic drop as CEO Ryan Cohen unveiled the firm’s strategy to downsize its store network.

The company’s shares closed the session with a significant decline of -12.13% to $25.22 apiece and a further -0.91% to $24.99 per stock in after-hours trading following the annual general shareholder meeting.

Undeterred by the market’s reaction, Cohen confidently outlined his vision for the firm’s future. The CEO envisions a business model with a smaller network and focuses on value-added products.

Despite the initial market reaction, he believes this strategy will boost sales and profits and pave the way for a more sustainable and profitable future for the company.

However, the CEO did not give details on how GameStop will utilize its about $4.00 billion cash, which piled up after share sales in June and May, noting that having a solid balance sheet is an advantage.

The company’s shares significantly surged last month after Keith Gill, a stock influencer known as Roaring Kitty, reappeared. Gill helped launch meme-stock mania in 2021, later revealing a significant position in GameStop.

Analysts noted that investors had been anticipating that Cohen would disclose details of a strategic plan to recover its firm’s business. Other experts said the CEO’s lack of information on acquisition plans upset some shareholders.

Meanwhile, reports show that solid gaming console market rivalry persists while the second-hand market for used software is gradually drying up as gamers shift to digital downloads.

Digital Downloads Shift Drives GameStop Disc Sales Dip

GameStop has been struggling with weak sales as its core business of selling new and pre-owned video game discs is affected by users’ shift to downloading games digitally or streaming.

The company disclosed that its net sales declined to $881.80 million compared with $1.24 billion last year.

Meanwhile, the video game retailer raised $933.00 million by selling shares to cash in on the meme-stock frenzy last month, when the stock doubled in value and surged an additional $2.14 billion early this month.

Gill stimulated the most recent rally among retail traders after revealing 5 million ownership of GameStop shares.

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