GameStop (GME.N) shares experienced a significant drop of over 14% on Wednesday, following the brick-and-mortar video game retailer’s announcement of a decline in fourth-quarter revenue.
This downturn was attributed to a decrease in consumer spending and heightened competition from e-commerce companies.
In a bid to mitigate costs amid economic uncertainty impacting discretionary spending, GameStop, headquartered in Grapevine, Texas, revealed on Tuesday that it had initiated unspecified job cuts.
This move aligns with similar actions taken by industry counterparts such as Japan’s Sony (6758.T) and Electronic Arts (EA.O).
With these developments, GameStop faces a potential market capitalization loss exceeding $700 million if the current losses persist.
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The company’s stock had already declined nearly 12% since the beginning of the year, reflecting the ongoing challenges in the retail and e-commerce landscape, despite its historical prominence in American malls.
As of February 3rd, GameStop’s store count stood at 4,169, down from 4,413 in January of the previous year.
GameStop, once celebrated as a leader among Wall Street’s “meme stocks,” witnessed a remarkable surge in its stock price in 2021, largely fueled by individual investors congregated on the Reddit community forum WallStreetBets.
However, the recent downturn in its fortunes prompted commentary from AJ Bell investment director Russ Mould, who remarked on the irony of its fall amid the resurgence of meme stock fervor, exemplified by Donald Trump’s media company experiencing a notable boost in share price following its Nasdaq debut.
Mould also criticized GameStop’s management for their perceived lack of transparency, citing the absence of detailed trading commentary and the decision to forgo a post-earnings conference call.
Despite GameStop’s announcement of its first adjusted per-share profit in four quarters, with earnings of 22 cents per share for the fourth quarter ended Feb. 3, investor sentiment remained subdued.
