What’s Happening To GameStop’s Operating Efficiency Amid So Much Store Activity?

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GameStop has been consolidating its mainline store network in the wake of faltering physical store sales of games and consoles.  Simultaneously, it has been rapidly expanding its technology brand stores. With so much store activity, it is easy to lose track of operating budget allocations, which can lead to operational inefficiency. However, GameStop has managed its operating expenses very well, despite all the closures and openings. Over the past four years, selling, general and administrative expenses per square foot have increased only moderately and we expect this growth to slow even further going forward, with the company planning its shutdowns and expansion effectively.

Interestingly, we expect operating lease expenses per square foot to fall notably going forward, considering the significant decline in 2015, when GameStop closed around 200 mainline stores and opened over 500 technology brand stores. It appears that the company is getting better lease deals on technology stores, as compared to its main stores. And since GameStop is expected to open a significant number of technology brand stores going forward, the per square foot rate of operating lease expense is likely to go down. Hence, overall, we can expect to see noticeable improvement in GameStop’s store operating efficiency.

Gamestop store operating efficiency

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for GameStop

 

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