GameStop Suspends Customer Access Due To Coronavirus Scare

In the wake of the coronavirus outbreak, GameStop Corp. (NYSE:GME) is the latest to join the slew of companies that announced an update on its business. The video game retailer is temporarily suspending customer access to its storefronts in all locations, which are not already closed. Meanwhile, GameStop will continue to make online deliveries along with practicing curbside pick-up at stores.

Moreover, management stated that customers can continue to make online purchases via GameStop.com and the GameStop application. Also, GameStop will continue to pay employees whose hours have been eliminated for an additional two weeks, based on the average hours worked in the last 10 weeks. Along with this, it will reimburse one full month of employee benefit contributions to eligible U.S personnel. Further, the company announced that it will provide additional details about its business when it reports fourth quarter and fiscal year 2019 results on Mar 26, 2020.

We note that COVID-19 has rattled the global economy. The retail sector, in particular, remains under pressure due to major supply-chain bottlenecks, reduced traffic, an increasing number of store closures and limited hours of working. This will not only hurt sales and productivity but is also likely to aggravate these companies’ cost burden as many retailers will continue to give full payments and benefits to their employees during the temporary closure.

Speaking of store closures, some major retailers, including Macy’s (NYSE:M) , Nordstorm (NYSE:JWN) and Kohl’s Corp. (NYSE:KSS) , have responded to this crisis by temporarily closing all stores. In this regard, Macy’s closed all stores nationwide, from Mar 17 till 31. Nordstorm shuttered all stores across the United States and Canada for the same timeframe. Also, Kohl’s shut down all stores worldwide, starting Mar 19 to Apr 1. That said, all these companies have noted that online stores will continue to operate.

Coming back to GameStop, the company has been grappling with sluggish sales at its stores due to consumers’ inclination toward buying games and gaming consoles from e-retailers or downloading or streaming games online. This is quite evident from its dismal performance in the third quarter of fiscal 2019 followed by a disappointing performance in the holiday season.

GameStop reported dismal third-quarter fiscal 2019 results, wherein both top and bottom lines not only fell short of the Zacks Consensus Estimate but also came below the prior-year quarter’s reported figures. The company’s performance was hurt by sluggish store sales as customers delayed console purchases until the launch of generation nine consoles from Sony and Microsoft (NASDAQ:MSFT) by the end of 2020.

Notably, shares of this Zacks Rank #2 (Buy) company have slumped 30.9% in the past three months compared with the industry’s decline of 51.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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