GameStop's (NYSE:GME) stock plunged about 75% over the past decade as the video game retailer struggled to keep pace with shifting industry trends. Its latest earnings report -- which featured a 25% drop in revenue and a big net loss -- indicates that the pain is far from over.

So how did GameStop, once a top destination for gamers, lose its mojo? Let's take a look back at the retailer's five biggest blunders over the past decade.

A man stands in front a wall filled with branching paths and question marks.

Image source: Getty Images.

1. Its chaotic overexpansion

GameStop, formerly known as Babbage's, became a subsidiary of bookseller Barnes & Noble in 1999. Barnes & Noble subsequently merged Babbage's with another video game retailer, Funco, and the game magazine Game Informer to create GameStop -- and the new company went public in 2002.

GameStop then expanded its brick-and-mortar footprint by acquiring EB Games in 2005, Rhino Video Games from Blockbuster in 2007, Free Record Shop's Norwegian stores and French video game retailer Micromania in 2008, Spring Mobile in 2013, and 163 RadioShack stores and the collectibles retailer ThinkGeek in 2015.

That chaotic expansion hurt GameStop by increasing its exposure to brick-and-mortar retailers as e-commerce rivals were growing, diluting its focus on video games with different product lines and banners, and saturating certain regions with too many stores. GameStop shuttered and divested some of those assets in recent years, but it still operates over 5,600 stores across 14 countries.

2. Ignoring the biggest threats to its business

As GameStop expanded, it ignored the rise of digital download platforms like Sony's (NYSE:SNE) PlayStation Store, the Microsoft (NASDAQ:MSFT) Store, and Valve's Steam. Publishers also preferred selling digital copies of games, which were much cheaper to distribute than physical copies.

Those headwinds reduced the number of physical discs in circulation and hurt GameStop's new and pre-owned software divisions. That paradigm shift is still ongoing -- Sony pulled its digital download codes from GameStop and other third-party retailers, Microsoft launched a disc-free Xbox One, and cloud gaming platforms are looming on the horizon.

3. Confusing digital efforts

Instead of addressing the rise of digital downloads, GameStop expanded its digital business in confusing directions. It expanded into browser-based games by acquiring a majority stake in Jolt Online Gaming in 2009 and Kongregate in 2010.

It also acquired Spawn Labs, an early cloud gaming start-up, and Impulse, a digital distribution and multiplayer gaming platform, in 2011. GameStop has since shuttered or sold all four businesses. It also launched GameTrust, its own first-party game publishing studio, three years ago -- but it's only released a few forgettable titles.

GameStop tried to expand its e-commerce ecosystem by buying BuyMyTronics, an online marketplace for consumer electronics, in 2012. The purchase was intended to complement its acquisitions of Apple reseller Simply Mac and Spring Mobile to diversify its core business away from video games, but it lacked the scale of entrenched electronic retailers like Best Buy.

GameStop also expanded its core gaming ecosystem with digital downloads, but it didn't stand out against similar services from Amazon or counter first-party digital distribution platforms from game publishers and console makers.

A couple checks out a video game at a store.

Image source: Getty Images.

4. Depending on cyclical trends

Pivoting back to its main stores, GameStop believed that selling non-software products -- like collectibles, gaming consoles, and accessories -- would diversify its top line away from physical games.

Unfortunately, all those businesses were volatile or cyclical. Its collectibles sales are still rising, but the unit's margins are declining -- likely due to aggressive markdowns. Its accessories business enjoyed a boost from strong headset sales last year thanks to the rise of battle royale games, but that cyclical boost faded away this year.

GameStop is counting on the launches of the PS5 and Xbox Series X to boost its hardware sales next year, but it's equally likely that gamers will simply buy those consoles from Amazon, Walmart, or Target -- which don't aggressively push customers toward loyalty programs like GameStop.

5. Three CEOs in two years

GameStop has been led by three CEOs and two interim CEOs over the past two years. Paul Raines, who led the company since 2010, formally resigned in early 2018 due to health issues, and passed away shortly afterwards.

Michael Mauler, a 16-year-veteran of the company, was appointed as its new CEO last February, but resigned just three months later for "personal reasons". The full-time CEO spot was left vacant until this March, when George Sherman, a company outsider, finally took the top job.

Those management changes prevented GameStop from launching any bold turnaround plans. Instead, GameStop perplexed investors by suspending its dividend, canceling (then reinstating) its buyback plan, and trying (but ultimately failing) to sell itself. Those moves all indicated that the company's management was treading water and running out of fresh ideas.

The bottom line

GameStop's stock might look tempting at about five times forward earnings, but it's cheap for obvious reasons. It failed to spot the biggest threats to its business, tried to solve its problems with messy acquisitions, and still hasn't formulated any viable turnaround plans.