Game over for GameStop?
Investors are nervous following the abrupt firing of its CEO and weaker than expected sales. Does Ryan Cohen have a plan to turn things around?
GameStop has beea a meme stock darling ever since activist investor and Chewy founder Ryan Cohen took a big stake in the video game retailer. But following Wednesday’s surprise ouster of GameStop CEO Matt Furlong, a former Amazon exec brought in by Cohen to turn things around for the struggling company, Cohen has to prove to Wall Street that he has an actual strategy to get GameStop back on track. Cohen is now GameStop’s executive chairman.
GameStop gave no reason for Furlong’s exit, but when he was hired two years ago, the hope was that Furlong would be able to bolster GameStop’s digital strategy. So much for that. GameStop also hired another ex-Amazon exec, Mike Recupero, as its CFO back in June 2021. But Recupero was gone just a year later as GameStop announced massive layoffs.
The C-suite at GameStop has had a revolving door since the company was elevated to its cult status among the Reddit WSB crowd back in early 2021 along with movie theater chain AMC. Cohen now either needs to find a seasoned retail veteran to stop the bleeding or he has to work some magic of his own and do for GameStop what he did at pet supplies retailer Chewy, i.e. become a legitimate e-commerce leader in a world dominated by Amazon.
It’s not going to be easy. GameStop also reported a bigger loss than expected for the first quarter on Wednesday as sales fell 10% from a year ago. That was below Wall Street’s targets too. Shares of GameStop plunged 20% Thursday. And while the stock is still up year-to-date, it is a very far cry from the meme-fueled peak levels of 2021.
GameStop did not hold a conference call Thursday to explain the awful numbers and Furlong’s firing. But make no mistake. Cohen is going to have to articulate what his strategy is for GameStop is at some point or the stock will keep sliding.
Cohen somewhat cryptically tweeted “Not for long” Wednesday afternoon. That may have been a play on words about the job status of his former CEO Furlong. But unless Cohen can succeed where Furlong failed, GameStop stock may not be for anyone looking to take a long position either. GameStop shorts were certainly licking their chops on Thursday.