(Bloomberg) -- GameStop Corp.’s uphill fight to regain relevance may lead right through Tulsa, Oklahoma.
The retailer is testing new store designs in that city, aiming to become a place where gamers come to hang out and socialize. Under new Chief Executive Officer George Sherman, the beleaguered chain is adding couches, vintage video games and tournaments to a handful of locations.
Sherman has a tough road ahead. GameStop, headquartered in the Dallas suburb of Grapevine, Texas, reported a wider-than-expected loss on Tuesday and delivered a dismal forecast for the year. The shares fell 11% on Wednesday, bringing its year-to-date decline to 64%.
Sherman picked Tulsa as a test market because it’s representative of Middle America, he said. Company stores there will be redesigned under several formats. One, an arena gaming concept, will include an area where customers can compete against one another and a viewing area where others can watch them play. A “couch co-op” will offer visitors a place to sit and play games. Another “retro” store design will let the public come in and play vintage console games.
‘Laboratory for Learning’
“We’re trying a lot of different approaches,” Sherman said. “This is 100% a laboratory for learning.”
As more customers play or purchase electronic versions of games online, GameStop’s 5,700 brick-and-mortar stores have become less of a draw. The company put itself up for sale last year but failed to find a buyer.
GameStop also sold off noncore businesses, such as a chain of wireless-phone stores, to focus more on its video-game outlets. And it has been cutting jobs, part of a belt-tightening effort that could save it $200 million annually by next year.
Sherman, who joined the company in April, said the new layouts will reduce the amount of merchandise to make them less cluttered. But GameStop will offer more accessories, such as computer headsets and cables -- many of them higher-margin private-label items. And the company will create mini stores within its stores emphasizing products from gaming-device makers Sony Corp., Microsoft Corp. and Nintendo Co. Part of the shift involves selling gift cards that customers can use to buy online content.
Not everyone is convinced the strategy will work.
Turning GameStop into a “social/cultural gaming hub is highly unlikely,” Benchmark Co. analyst Mike Hickey said in a research note. He recommends that investors sell the stock.
Many games today let players chat with one another already, giving them a built-in social component, he said. So it’s not clear why customers would need to come to a store.
Sherman, who previously ran an auto-parts retailer and a chain of wireless-phone stores, said he was attracted to the video-game business because of its growth potential.
“The industry of gaming is red-hot,” he said. “The specific issue is the need for GameStop to pivot.”
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