New York (CNN) — GameStop’s new CEO, George Sherman, says the company “is in a tough place” and “needs to make some changes” to keep up with the video game industry.
GameStop’s total global sales dropped 14.3% to $1.3 billion in the second quarter, the company reported Tuesday. Hardware declined 41.1%, while software sales dropped 5.3%, as Nintendo Switch titles grew. The net loss was $415.3 million.
“We’re at the end of the console cycle,” Sherman told CNN Business Wednesday. “Gaming as an industry could not be stronger … it’s us that needs to pivot. It’s GameStop that needs to make some changes.”
Although the video game industry as a whole is growing, physical sales of video games, one of GameStop’s mainstays, have fallen over the past ten years, according to the NPD Group, a market research company. Video game console sales of the PlayStation 4 and Xbox One X are also drying up, as Sony (SNE) and Microsoft (MSFT) tease new consoles for next year.
As part of its cost-saving plan, GameStop said it will close 180 to 200 underperforming stores by the end of this fiscal year, which ends in February 2020.
“That’s part of brick-and-mortar retail today,” said Sherman. “Part of being a good retailer is you’re not trying to hold onto every store.”
The company also had two rounds of layoffs in August, one of which eliminated 120 staff positions and fired at least six journalists from its gaming publication, “Game Informer.” Sherman said these were planned changes.”
If you look at the trend of sales over the last several years, selling general administrative costs didn’t move with sales. So we had a cost structure we had to address,” he said. “We found [it] unpleasant but we needed to do it.”
The company said it has no further plans for layoffs.