Movie Gallery Shuttering 200 Game Crazy Stores

29 Sep, 2009 By: Erik Gruenwedel

---

Movie Gallery is shuttering about 200 Game Crazy store-within-a-store locations in October, underscoring the plummeting fortunes of the video game industry.

Wilsonville, Ore.-based Gallery, which is owned by private investors and includes the Hollywood Video chain, operates about 680 Game Crazy locations.

In a statement, Gallery said the closures were the result of operating in an “unprecedented consumer/retail environment.”

“In order for us to continue to best serve our millions of customers across North America, we’re addressing underperforming stores and ensuring that there is sufficient return on investment associated with each of these stores going forward. The vast majority of our stores will be unaffected by these efforts.”

Video game sales in August fell 16% from the same month in 2008, according to data from The NPD Group. Overall game sales have fallen behind 14% year-to-date compared to 2008, from $10.58 billion to $9.07 billion.

“The industry realized its sixth consecutive month-over-month decline, and while improved over the last several months, it’s still a notable decline,” NPD analyst Anita Frazier said earlier this month.
  
Game software sales fell 15% in August, compared to the same month last year, while hardware sales lagged behind by 25%.

Store personnel at Game Crazy locations in Alhambra, Calif., and Rosemead, Calif., confirmed the closures, saying their locations would begin 30%-off sales on all games and hardware next week.

“If you have a game on order, you better come pick it up,” said an employee at the Alhambra Crazy. “We’re done in three weeks.”

Indeed, Bryan Ashenberg, a New York-based stock portfolio manager, told TheStreet.com he believes the business model for No. 1 videogame retailer GameStop with 6,200 stores is impaired over the long term.

Ashenberg said the Grapevine, Texas-based chain’s bread-and-butter business of used games is under attack by Amazon, Best Buy and Wal-Mart. In addition, he said game manufacturers such as Microsoft are making many of their games available as a download from the Internet.

“The whole online gaming sector is gaining steam,” Ashenberg said. “You can play games from home that aren’t even sold in stores. Until we see the advent of the next hardware platform that could really get people interested in buying games again, we’re going to stay away from GameStop [as a stock].”

Michael Pachter, senior research analyst with Wedbush Morgan Securities in Los Angeles, agreed that video game retail has been in a freefall this year but said the industry was turning the corner.

“I think sales are about to turn positive for the first time in a year and stay positive,” Pachter said. “Timing is everything and Movie Gallery ran out of money and patience. I think Blockbuster will keep their [Game Rush] stores open.”
 

Bookmark it: digg del.icio.us technorati yahoo facebook twitter