GameStop is already struggling to survive and now the retailer must deal with two new problems threatening to drag it down.
American retailer GameStop has suffered misfortune after misfortune for a long while. Sales of pre-owned games are down, due to everyone waiting for the next generation of consoles to release, and now it has been hit with two new issues.
Firstly, according to The Motley Fool, ratings agency Moody has downgraded the company’s debt, which in turn has increased the probability of default. This isn’t entirely bad news, as it means that GameStop will remain relatively stable for now and is predicted to meet its 2020 expectations.
However, the agency did acknowledge the retailer’s current struggles, with Moody vice president Adam McLaren saying: ‘Sustained competitive threats from downloadable, streaming, and subscription gaming services, as well as the company’s ongoing transformation to improve profitability and evolve its vendor and partner relationships, elevate the company’s business and operational risk during a period of industry weakness.’
The second issue regards Simply Mac, an Apple products reseller owned by GameStop. The business was underperforming, having been delisted from the Nasdaq stock exchange and losing executives and directors over the last year.
GameStop had managed to sell the business to Cool Holdings, only for Cool Holdings to miss its first instalment payment and now GameStop is demanding that it be provided $8 million (justover £6 million) in full.
Cool Holdings has apparently hired consultants to negotiate a new payment plan, but given its current situation, GameStop would probably rather have the $8 million, rather than potentially having Simply Mac be put back onto its books.
It’s unlikely that GameStop will be serious trouble any time soon, and it could very well survive until next year, but it’s still tumultuous times for the company and indeed anyone in the physical retail business.
Last summer GameStop made over 100 staff redundant, including half the editorial team behind Game Informer, and if the coronavirus really does delay the launch of the next generation they may struggle to survive.
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