GameStop Corp. shares tumbled Friday after the company fired Chief Financial Officer Mike Recupero and said it’s cutting jobs. It said it’s trying to turn around a business buffeted by shifting gaming demands and market malaise. The stock was down 6.9% as the market opened.
Diana Jajeh, the current chief accounting officer, will replace Recupero, effective immediately, GameStop said Thursday in a securities filing. Recupero isn’t entitled to any severance payments beyond what is outlined in his offer letter from the company, according to the filing.
The struggling video game retailer is making a “number of reductions” to staff, according to a company memo reviewed by Bloomberg and initially reported by Axios. The parent company and Game Informer, an online magazine, will feel the cuts.
Ryan Cohen, who joined the board and became chairman last year, has been trying to revive growth at beleaguered GameStop, which has slowed as gamers shifted from buying game discs and cartridges to digital downloads. During the pandemic, GameStop became emblematic of the so-called meme-stock craze. Retail traders would bid up the price of certain companies, prompted by chatter on Reddit and other social media, rather than business fundamentals.
GameStop Corp. is No. 48 in the Top 1000, Digital Commerce 360’s rankings of the largest online retailers by web sales.
Hiring and firing
“After making more than 600 corporate hires in 2021 and the first half of 2022, we have a stronger understanding of our transformation needs,” GameStop CEO Matt Furlong wrote in the memo. “This has positioned us to right-size headcount across several corporate departments.”
The company is also coming to grips with a clash about strategy between recent hires, many from ecommerce giant Amazon.com Inc., and GameStop staffers with a background in brick-and-mortar game sales. Amazon ranks No. 1 in the Top 1000.
GameStop had recently hired several Amazon employees in an effort to shift its focus from physical storefronts to ecommerce. According to Ars Technica, 90% of new console games are exclusively available through digital downloads. GameStop’s CEO, Chief Growth Officer and the now-departed CFO all came from long runs at Amazon. Cohen, GameStop’s chairman, founded Chewy.com, which dominates the pet ecommerce world.
However, GameStop operated 4,573 stores as of January. (243 fewer than a year earlier.) The skills associated with running an ecommerce business don’t easily translate into a brick-and-mortar business, according to a person familiar with the matter. That contributes to confusion and uncertainty around the company’s direction. Executives from online sales, for example, are ill-suited to negotiating retail leases and operating stores, this person said. Recupero was fired because he wasn’t hands-on enough and treated GameStop as if it were Amazon, another person with knowledge of the matter said.
“Everyone in the organization must become even more hands-on and embrace a heightened level of accountability for results,” Furlong wrote in the memo.
Yet another shift to digital
Another big challenge on the horizon: a push into digital assets. In June, the company launched a digital asset wallet that will allow gamers to store, send and receive cryptocurrencies and nonfungible tokens without leaving their web browser. The wallet will be used in GameStop’s upcoming NFT marketplace. The NFT marketplace would launch during a major downtown in the crypto industry.
Analysts aren’t sure the company will be an NFT market leader. It has struggled to transition from a brick-and-mortar game retail store. The recent selloff in cryptocurrencies hasn’t helped the picture for GameStop’s new initiatives.
GameStop needs direction
At a South by Southwest panel in March, former Nintendo of America president and former GameStop board member Reggie Fils-Aime highlighted GameStop’s strategic fog.
“You can go on the GameStop website. Try and find a strategy. There is no articulated strategy,” Fils-Aime said. “I come from the business perspective that you need to articulate your strategy to all of your key constituents.”
GameStop has suffered from its strategy and supply chain issues. Over the last several years, it has tried a variety of business concepts with mixed reactions from investors and customers. Under Cohen, the company has been expanding its offerings, improving logistics and making a series of new hires with ecommerce and technology experience. That includes Furlong, who also came from Amazon, where he managed the Australia business. It also includes Nir Patel, chief operating officer.
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