GameStop Accelerates Store Closures as Revenue Declines and Bitcoin Reliance Grows

What happened

GameStop plans to close over 430 US stores in early 2026, continuing its aggressive retail footprint rationalization strategy amid persistent structural challenges. This move follows the closure of nearly 1,000 stores in FY24, aimed at reducing SG&A costs and focusing on a smaller, purportedly more productive store base. Despite these cost-cutting efforts, the company's core revenue continues to decline, with FY24 sales down 27.5% and Q3 FY25 sales falling 4.6% year-over-year, highlighting ongoing erosion in hardware and software categories. Profitability now increasingly depends on non-operating income from Bitcoin investments and interest earnings, rather than sustainable retail operations, introducing significant volatility. The store closures underscore the company's shift towards financial engineering and away from stabilizing its beleaguered physical retail model, with no clear path to revenue stabilization.

Implication

The additional store closures will likely accelerate revenue erosion, as remaining stores may struggle to maintain traffic, potentially worsening the bear case of double-digit sales drops. While cost savings from closures could temporarily support margins, long-term viability hinges on collectibles growth offsetting hardware and software declines, a trend yet to prove sustainable. Bitcoin exposure adds significant earnings volatility, with any downturn risking reported profits and exposing the balance sheet to further stress. High valuation metrics, such as a 270x EV/EBITDA ratio, reflect market optimism disconnected from operational reality, increasing downside risk if sentiment shifts. Investors must monitor upcoming disclosures for revenue impact post-closures and Bitcoin performance to assess whether the company is sliding toward a leveraged financial vehicle with a shrinking core business.

Thesis delta

The announcement of 430 store closures in early 2026 confirms the execution of GameStop's aggressive footprint rationalization, as outlined in the DeepValue report. It reinforces the thesis that the company is prioritizing cost cuts and Bitcoin reliance over operational stabilization, with no shift in the fundamental bearish outlook on core retail erosion and financial risks.