Two major new releases, Call of Duty: Black Ops 4 and Fallout 76, failed to sell up to expectation at GameStop, the retailer announced today in its latest earnings report.
CFO Rob Lloyd said Black Ops 4 was "not as successful as we had hoped." For Fallout 76, the executive said the game's review scores likely hurt sales. "Obviously, you can see in the market what the Metacritic scores are around Fallout 76, and that's impacted its sell-through. I'll probably just leave it at that."
Some of the sports games that released in August and September were also "not up to our expectations" in regards to sales, Lloyd explained. He didn't name any titles, but Madden NFL 19, FIFA 19, NBA 2K19, and NBA Live 19 all released in August and September this year.
On the brighter side, GameStop management said Red Dead Redemption 2 and Spider-Man for PS4 were two of its top-sellers. And while Black Ops 4 did not sell up to GameStop's expectations, the title launching in October instead of November helped GameStop's overall game sales rise by more than 10 percent during the quarter.
GameStop management did not say what its sales expectations were for any new release, so we don't know the degree to which Black Ops 4 and Fallout 76 underperformed. However, their underperformance was significant enough to disclose on the earnings call.
GameStop's total global sales--comprising hardware, software, accessories, and more--rose by 4.8 percent to $2.1 billion for the quarter ended November 3. New hardware sales rose 12.8 percent thanks to gains from Xbox One X and PS4. As for software, as mentioned, game sales jumped by 10.9 percent. Accessories sales, meanwhile, posted the biggest gains of all, rising 32.6 percent. Pre-owned sales dropped by 13.4 percent.
Overall, GameStop posted a loss of $488.6 million for the quarter, which compares to a profit of $59.4 million during the same quarter last year. GameStop management said the loss was due to an "impairment charge" of $587.5 million that it paid as a result of the "sustained decline in the company's share price." Indeed, GameStop's share price has been steadily falling for years now from more than $45 per share in 2015 to around $14.5 today.
Times have changed in the video game business. Game sales are increasingly trending toward digital over physical, which is theoretically a problem for GameStop, as physical sales--and re-selling games--was for a time the bread and butter of GameStop's business model.
In June this year, GameStop announced that it was entering "exploratory discussions" with outside companies about potentially selling itself. Earlier this month, GameStop announced its plans to sell off its Spring Mobile division for $700 million.
The company is currently conducting a comprehensive review of its business, and this presumably also includes a potential sale. Former Xbox boss Shane Kim is the company's interim CEO; he took over after Michael Mauler quit GameStop after only three months for "personal reasons." Longtime GameStop CEO Paul Raines died in March at the age of 53. GameStop is currently working with an executive hiring company to find a permanent CEO.
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