GameStop's last few years haven't been kind, with the company experiencing slower sales and declining stocks. The first quarter report for the game retailer showed the trend continues, despite strong sales from the Switch and the new Zelda game.
First, The Good News
Despite slower sales for some of the bigger holiday games like Call of Duty that have been big sales drivers for GameStop, the retailer has seen the biggest boon it's had in a while thanks to the Nintendo Switch. The new system has sold extremely well since launch, with supply being a consistent problem for retailers in general because of high demand.
That's also in spite of a lack of big games on the system, with Mario Kart 8 Deluxe Edition and Legend of Zelda: Breath of the Wild being the biggest games out. That's not to knock out other games like 1-2 Switch, but they lack the franchise profile that the the other two have.
In April, Nintendo reported that in one month, the Switch had sold nearly as many systems as the Wii U had in its first year. GameStop was able to reap some rewards from that thanks to in-store and website sales on the system. GameStop was able to report higher-than-expected sales and profit for its first quarter earnings report and investor call.
Legend of Zelda: Breath of the Wild proved to be a major contributor to this as well. The newest entry in the Nintendo series saw extremely high sales, with the same report mentioned above revealing that Zelda's Switch version sold more copies than the Switch system itself. This reflects the selling power the Nintendo brand still has, even coming off of the disappointing Wii U.
Then There's The Bad News
GameStop still saw a dip in its stock, dropping nearly 8 percent before Wall Street opened on May 26. This drop is due to consistently slow sales over the last few years, despite the bump from Switch sales these last two months.
The other contributor was the delay of Red Dead Redemption 2. Rockstar's newest game is expected to sell very well when released, but the push to 2018 has hurt the outlook for GameStop's fall/winter period.
This stock drop and declining store sales can be also be attributed to increasing digital sales for games. More gamers have been switching to digital versions of games instead of physical copies. This and the declining interest in traditionally big sellers like Call of Duty have hurt GameStop's business.
GameStop has been looking at new avenues to increase stock and profitability, such as ThinkGeek collectibles stores and select GameStops offering Cricket Wireless, but it will be some time before any impact is seen from these.
