(Bloomberg) — GameStop Corp. fired Chief Financial Officer Mike Recupero and is cutting jobs in a bid to turn around a business buffeted by shifting gaming demands and market malaise. The shares tumbled more than 5% in extended trading on the news.
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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 cuts will be felt across the parent company and Game Informer, an online magazine.
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 to digital downloads. During the pandemic, GameStop became emblematic of the so-called meme-stock craze whereby retail traders bid up the price of certain companies, prompted by chatter on Reddit and other social media, rather than business fundamentals.
“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 Chief Executive Officer 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 e-commerce giant Amazon.com Inc., and GameStop staffers with a background in brick-and-mortar game sales.
GameStop had recently hired several Amazon employees in an effort to shift its focus from physical storefronts to e-commerce. 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 e-commerce world.
However, GameStop operated 4,573 stores as of January. (243 fewer than a year earlier). The skills associated with running an e-commerce business don’t easily translate into a brick-and-mortar business, according to a person familiar with the matter, contributing 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.
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 non-fungible tokens without leaving their web browser. The wallet will be used in GameStop’s new NFT marketplace, expected to launch in the current quarter. The NFT marketplace would launch during a major downtown in the crypto industry.
Analysts aren’t fully convinced that the company, which has struggled to transition from a brick-and-mortar game retail store, will become a leader in the NFT market. The recent selloff in cryptocurrencies hasn’t helped the picture for GameStop’s new initiatives.
GameStop shares tumbled to a low of $120.61 in extended trading. They had gained 15% during regular trading to close at $135.12 after the company announced a four-for-one stock split on Wednesday. GameStop didn’t immediately reply to a request for comment.
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 churned through 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 e-commerce and technology experience. That includes Furlong, who also came from Amazon, where he managed the Australia business, and Nir Patel, who was named chief operating officer.
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