Over the past couple of years, GameStop has been one of the most bizarre retail stories. After slumping in sales and market share, the stock soared thanks to Internet investors. Then, the founder of Chewy, Ryan Cohen, invested heavily in the company and kept exerting his influence as he rose to the position of board chairman.
Cohen brought in a lot of Chewy executives and some from other companies, but not everyone has stuck around for long. The chief operating officer left GameStop after just seven months on the job. The position was left vacant since October, but in Mid-May, the CEO of department store chain Belk left his job of about a year to take the COO position at GameStop.
Now, as of July 7th, GameStop has fired its chief financial officer and was reportedly pushed out by Cohen. He joined GameStop just a little over a year ago, back in June 2021. The chief accounting officer is taking over the position.
GameStop’s Financials
For the quarter ending in January (Q4 2021), GameStop had better-than-expected sales, but it came at a price: they unexpectedly lost money in the period.
GameStop seemed unbothered by the report, as they said this was necessary for their future.
In Q1 2022, GameStop increased its losses.
Now, GameStop is splitting the stock, so that for every piece of stock, holders will get an additional three (4-for-1). This makes it easier for new investors to come in and usually spurs rallies.
But while GameStop’s stock is not as high as it has been in the past year, it still is riding the meme stock wave, and with stock going to be 1/4th of its current about $130 value, executives are hoping more people will jump in.
Layoffs and NFTs
However, it seems counterintuitive for the CFO to be fired if GameStop is also saying losses are necessary for it to innovate itself. And it wasn’t just the CFO who was let go. According to an internal memo from the CEO, GameStop laid off people at the corporate level. A lot of layoffs seem to be centered at its Texas headquarters and follows a previous round in May. Employees for the company’s magazine Game Informer were also included.
In the memo, CEO Matt Furlong says the company is going to “making a significant investment in our Store Leaders and field employees” as they aim for “sales growth in our commerce business and launching new products that empower customers within the digital asset and web3 gaming verticals”.
The letter did not say how they were going to improve or help employees, just that an announcement will be made “in the coming weeks”.
For the latter, though, GameStop previously revealed their much ballyhooed NFT marketplace is due by the end of Q2, which would be September. It may even be live as soon as the end of this month.
In May, GameStop’s virtual wallet went live, which, according to the press release, allows users “to store, send, receive and use cryptocurrencies and non-fungible tokens (“NFTs”) across decentralized apps without having to leave their web browsers”. This Etherum technology will be used on their NFT marketplace.
Criticized Plans…or Rather, “Plans”
However, beyond that, analysts have been left puzzled as to what GameStop’s turnaround plan actually is. There have been concerns for months about the lack of detail and that the company will just keep throwing around buzzwords.
One particular person stumped about GameStop’s trajectory is Reggie Fils-Aimé, former Nintendo of America president and GameStop board member.
His leaving GameStop was announced in March 2021 amongst other shakeups spearheaded by Cohen.
Fils-Aimé recently appeared at South by Southwest (SXSW) conference and festival, and in his interview, he talked about his brief one-year tenure at GameStop. (Start about the 32 minute mark)
There, he mentioned that GameStop doesn’t have an “articulated strategy”, and the higher-ups in the company didn’t want him included in talks to keep the number of those in-the-know low: “Leadership says, ‘Well we don’t want to articulate our strategy because we don’t want anyone to steal our strategy.'”
Fils-Aimé criticized this approach as well as Cohen bringing on people without a related background. He also mentioned he’s no longer a GameStop shareholder.
NFTs: The Light of Hope or a Recipe for Disaster?
So GameStop basically has only been talking about NFTs recently. This is despite the fact sales in software and collectibles have risen and made up over 50% of revenue for the first time since Q3 2020. GameStop also touts that its Pro membership numbers are up, but I wonder how many are like me and are just using it to nab certain gaming gift cards for 50% off each month. (And, at times, people were able to get some for free in-store.) Still, despite that fact not being good for the bottom line, a solid management team could capitalize on this.
Instead, it’s all about the blockchain. However, the NFT market is also hardly thriving and has greatly fallen from its peaks, and the US government is increasing its scrutiny of the technology — including recent charges in the biggest known NFT scam to date.
Personally, I can’t help but compare the situation to Sears. From my perspective, it seems like both cases featured a financial hotshot who switched his attention to a different field and brings on yes-men (yes-people?) versus experts. After all, Cohen seems to have his hands in many of the departures since he’s risen to power.
And there are questions as to the company’s hirings. GameStop’s new COO, Nir Patel, had been at Belk since 2016 and was previously at Kohl’s and Land’s End. Belk wrote off some debt during a super-quick one-day bankruptcy in February 2021, and Patel was promoted to CEO in July. But he left abruptly; did GameStop really value him that much?
Well, analysts doubt Patel led any meaningful change at Belk during his tenure. Belk is a privately-owned company, so we don’t know exactly whether its financial situation improved or not, and maybe no one could. Patel does have experience in retail, but his background is in clothing and department stores, not gaming and collectibles — let alone their precious blockchain technology.
Of course, it would be impossible to only find people who have GameStop-like experience, but people like Reggie Fils-Aimé surely would have had valuable and relatively unique input and at least could provide additional perspective outside of just a retail-oriented view.
I’ve already made my feelings on NFTs known, but let’s just say GameStop is right and their NFT marketplace is a hit…what are Furlong, Cohen, and the other GameStop executives planning for their stores? Okay, investing in your employees is great, but how? What are they going to do to prevent more walkouts with workers citing bad company policy and culture? Why are the employees almost an afterthought compared to their NFTs?
And what about their actual webstore? If GameStop is going to be such a technology-focused company, why the heck can’t I do like most other retailers and access my local store’s inventory with a single filter? Or maybe invest in trading in games online?
Of course, my sympathies to those who are now out of a job (and it seems rather unceremoniously), and I’m sure we will hear more from some of those people in the coming months. I have a feeling they’re not all going to be glowing reviews about the company.
Even if you think they may just be disgruntled employees, GameStop needs a plan — a publicly stated plan. They’ve been talking about an NFT marketplace for months; somehow the higher-ups aren’t concerned about someone stealing that great turnaround idea, but all others are hush-hush? It just seems like they are putting all their eggs into one basket — a basket without handles or cushioning.