Pre-tax losses at the Irish unit of GameStop last year more than doubled to €7.68 million even before Covid-19 impacted on the business.
New accounts show the seller of the likes of the best-selling FIFA and Call of Duty series of games recorded the increased losses after revenues declined by 26.5 per cent from €50.2 million to €36.8 million in the 12 months to the end of February 1st, 2020.
Some of the best-selling video games from the year under review include Star Wars, Call of Duty Modern Warfare, Minecraft and FIFA 20.
The directors state that the year to the end of February 1st 2020 “raised questions regarding going concern. Going concern is applied in the current year financial statements, but there is a level of material uncertainty disclosed”.
After sustaining the 11 per cent increase in losses last year, the company’s business was then hit by the Covid-19 pandemic.
Under the heading of ‘future developments’ the directors state that “during 2020, we experienced a reduction in sales relating to store closures because of Covid-19”.
They state: “We mitigated the impact through wage subsidies, rent abatements, property tax reliefs, temporary staff lay-offs and VAT liability measures.”
The directors state that new game releases did not take place in 2020 and therefore “2021 will see the release of new titles and therefore improvement in earnings before interest, tax, depreciation and amortisation (EBITDA)”.
A further note states that the new console launches will result in increased gross margins and improved operating profit.
The directors state “we will open stores where we can identify a profitable opportunity, and we will consider closing any stores that are not performing to expectations or where the cost base, particularly occupancy costs, are out of line with the business levels in the location”.
In the 12 months to the end of February 1st 2020, operating losses increased three-fold from €1.58 million to €4.88 million.
Interest charges of €2.79 million resulted in the pre-tax losses of €7.6 million.
The pre-tax loss last year takes account of non-cash depreciation costs of €4.34 million and non-cash impairment costs of €1.35 million.
Numbers employed last year reduced from 336 to 303 as staff costs declined from €9.02 million to €8.28 million.
Staff costs included severance costs of €205,271.
Earlier this year, GameStop’s US parent was at the centre of a trading frenzy that pushed the value of the video game retailer to over $24 billion.