GameStop suffered record-breaking financial losses over 2018, resulting in a $673 million USD profit loss that also saw the company's net sales slide down a full 3% when compared to 2017's numbers. GameStop's previous fiscal year saw the company record a net profit of $34.7 million, and although that figure isn't big for a company that has been as historically profitable as GameStop, it still marks a significant downturn over 2018.
GameStop has been struggling to carve out a place for its business as the video game industry continues to turn toward digital downloads as a primary source of distributing titles. GameStop's profitability has been in flux for many years, with the company last recording a year-over-year gain in fiscal 2014 and actively seeking buyouts in 2018. In response to the tumultuous nature of video game distribution—and its impact on pre-owned games, which don't circulate quite as often these days—GameStop has attempted to pivot to a more diverse offering for consumers, with a focus on collectibles that has seen profit growth in that sector continue to growth.
GameStop's fiscal year in 2018 was markedly bad in the video game section, according to a report from GamesIndustry.biz, with new hardware sales down 1%, new software down 5%, and pre-owned and value products dropping more than 13%. The last category is by far the most concerning, as used game trade-ins and sales have often been a strong source of revenue for game retailers. It's yet another sign that digital downloads are quickly overtaking physical sales, and although that's not a surprise at this point, the rate at which the change is occurring might be quicker than anyone—especially GameStop—might have anticipated. GameStop COO and CFO Rob Lloyd doesn't appear to be as worried about the numbers as they might indicate the company should be, though, stating:
"We are pleased to have delivered fiscal 2018 results within our adjusted guidance range, which included fourth quarter and full year sales growth across video game accessories, collectibles and digital."
Lloyd also stated that the company is fully aware of the challenges facing pre-owned video game businesses, and acknowledged that GameStop would need to continue changing its business model moving forward in order to find something that can work long-term. Still, it's a concerning time for GameStop. Despite having middling fiscal years with regularity as the games industry continues to evolve, the company has only posted two full-year losses in its history: in 2012, it reported a net loss of $269.7 million, and a net loss of $7 million back in 2000. Even combining those two fiscal years wouldn't even approach half the losses the company suffered in 2018, however.
Obviously, digital downloads and distribution services are changing the way pre-owned game retailers approach the business. The Epic Games Store's launch, coupled with Steam's continued ubiquity despite some extremely questionable policy changes, are major problems that companies like GameStop can't solve, but instead need to mitigate. Whether that's continuing the transition into collectible sales or finding a way to partner digitally with other companies, GameStop's 2018 fiscal year suggests that a long-term solution needs to come sooner rather than later.