GameStop Downgraded By Moody’s: Can The Gaming Retailer Over Haul Its Business Model?

As GameStop (GME) continues to grapple with consumers waiting to purchase new games until the next generation of consoles come out, Moody’s has downgraded the retailer from a B2 to Ba2 rating. The retailer is also plagued by competitive gaming streaming, online downloads, and subscription services that have caused its sales to lag.

Moody’s cited “weaker than anticipated sales and operating performance, driven largely by declines in new hardware and software sales.” Analysts at Moody’s expect GameStop to continue to feel the sales pinch through 2020.

Adam McLaren, vice president at Moody’s, said in a statement, “Sustained competitive threats from downloadable, streaming, and subscription gaming services, as well as the company's ongoing transformation to improve profitability and evolve its vendor and partner relationships, elevate the company's business and operational risk during a period of industry weakness.”

Moody’s, which has a stable outlook for GameStop, also said that the retailer “is exposed to social risk such as changing demographic and societal trends, including the shift of consumers purchasing goods and accessories online.”

The rating firm did say that GameStop could be upgraded if it is able to “return to growth in the company’s core segments,” which include new and pre-owned games.

GameStop posted a less than stellar Q3 earnings, which saw sales dip by 26% year-over-year. The company also announced it was closing up to 200 stores by the end of fiscal 2019.

S&P downgraded GameStop’s credit rating to a B+ last week.

Shares of GameStop were up 2.34% as of 2:26 p.m. EST on Monday.