Why GameStop May Fall into Bankruptcy

GameStop (NYSE:GME), once the retail store gamers would shop at for discounts, is in free-fall on the stock markets. The stock closed at below $10 after reporting fourth-quarter results. Why is its business falling apart?

GameStop reported sales increasing just 1.4%. New hardware sales fell 9.8% to $761.3 million while new software sales fell 7.8% to $961.4 million. Whereas GameStop could offset falling game sales with higher unit console sales, this quarter, that did not happen. And with full-year software sales down 5.1%, the race to compete against online boutiques and streaming game services like Steam adds risks for investors.

Negative income of $673 million, or a loss of $6.59 in FY 2018, will likely worsen this year. The firm had growth in collectibles and accessories in the year but these segments are a small portion of total sales.

Without any refresh in consoles, sluggish Nintendo Switch sales, and the late gaming cycle in play, uncertainties run high for GME stock. As cash flow falls in negative territory every quarter and as the sales slowdown accelerates, GME could fall into bankruptcy. Its only hope is selling the company.