Video game retailer GameStop has decided to close one of its U.S. distribution centers — in a move that will lay off hundreds of workers and put an e-commerce facility up for grabs — as it continues to focus on bringing increased efficiency to its business and boosting its bottom line.
The Grapevine, Texas-based retailer plans to permanently close its more than 630,000-square-foot distribution hub at 972 Conestoga Parkway in Shepherdsville, Kentucky, around the end of June. The company says the entire facility and all its employees will be impacted, with a total of 236 workers expected to be laid off beginning in mid-March running through the end of June, according to a Worker Adjustment and Retraining Notification letter sent to the Kentucky Career Center.
The Kentucky distribution hub is about 20 miles south of Louisville, the state's largest city. It is one of a handful of the company's U.S. e-commerce facilities, with two in its hometown of Grapevine, one in York, Pennsylvania, and one in Reno, Nevada. The video game retailer also has distribution hubs in Australia, Canada and Italy to support its operations outside of the United States.
The company did not immediately respond to an emailed request for comment from CoStar News. However, GameStop executives warned its investors that it would change up its e-commerce efforts in its latest annual filing, which was issued in late January of 2022.
"As we continue to increase our e-commerce capabilities, we expect our reliance on third-party delivery services to increase," executives wrote.
It wasn't immediately clear if GameStop planned to rely on a third-party delivery service to replace its Kentucky hub. The Kentucky industrial facility has been put on the sublease market by a JLL team. According to marketing materials, the space is available beginning July 1.
The planned distribution hub closure comes as CEO Matt Furlong told investors last month he was seeking to "transform the company" and try something never seen before in the retail industry. Furlong, a former Amazon executive who took the helm of GameStop as its CEO in mid-2021, said the last two years was a time for the company to repair its "decayed foundation," and "reestablish a culture of operational intensity and setting the right long-term priority" for the video game retailer.
"We're attempting to accomplish something unprecedented in the retail sector," Furlong said. "We're seeking to transform a legacy brick-and-mortar business that was on the brink of bankruptcy into a retailer that meets customers' needs through our stores, e-commerce properties and emerging sales channels," Furlong told investors last month, adding the company was well poised heading into 2023 with a strong cash position, lack of debt and a shrinking cost structure.
Before Furlong's leadership began, GameStop was on the verge of filing for bankruptcy in early 2021. However, shares went on a wild price swing at the end of January, spurred by individual investors inspired by an anti-establishment rallying cry on a Reddit message board. The investor interest in the company brought new life to GameStop, which sold off its owned real estate and shed hundreds of stores in a transformational plan — with the goal of becoming what one former executive called "a technology-obsessed company for gamers."
As of GameStop's last annual report to the Securities and Exchange Commission, the company had a total of 4,573 retail stores, including 3,018 in the United States. In 2020, the company had more than 5,000 stores in 10 countries. The pandemic forced GameStop to rethink its real estate. The retailer's entire fleet of stores is leased in short-term deals ranging from one- to five-years, allowing it to be nimble where it has a physical presence in changing market conditions, executives said in SEC filings. The leases for a third of its store fleet, totaling nearly 1,500 stores, are set to expire this calendar year, according to the filing.
Last month, Furlong told investors GameStop was "in the process of aligning corporate costs to our go-forward needs after completing the majority of necessary upgrades to our systems, fulfillment capabilities and overall foundation." A big part of GameStop's cost cutting measures stemmed from a reduction of corporate headcount in the back half of the 2022 calendar year, he said, with the company not replacing departing employees.