GameStop announced Wednesday that its board had fired CEO Matt Furlong. Ryan Cohen was elected Chairman of the Board.
The company also reported a net loss of $50.5 million, or 17 cents a share. Revenue fell 11% to $1.24 billion. There weren’t enough analysts providing FactSet forecasts to generate a consensus estimate.
The company canceled its earnings announcement, which was due after the market close on Wednesday.
Shares fell 19% in late trade.
The company said in a filing with the Securities and Exchange Commission on Wednesday that the board fired Furlong on Monday. The board of directors appointed Mark H. Robinson as general manager and chief executive officer of GameStop. He will report to Cohen. Robinson’s responsibilities include “administrative affairs, corporate development, legal affairs and support for GameStop holdings.”
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Furlong, a former Amazon executive, took over as CEO in 2021. The press release announcing the move referred to him as the company’s “former CEO.”
“Classless move, ‘cancelled’ and didn’t even give his name,” Wedbush analyst Michael Pachter told Barron’s via email. “Call him Voldemort.”
Voldemort, the antagonist of Harry Potter, is often referred to as “the one whose name must not be mentioned”.
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Cohen’s responsibilities include capital allocation and management oversight, the company said.
Pachter notes that Furlong is the third high-profile former Amazon executive to join the company in 2021 but has since left.
“I don’t see any signs of a trend reversal,” said Pachter. “The strategy was ‘Be like Amazon’, they brought in Amazon executives, expanded the fulfillment capabilities and worked on the online store, but it just wasn’t working.”
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Under Furlong, the video game retailer had been cutting costs in recent quarters, which helped the company report earnings of 16 cents per share in the quarter ended January. Also, a marketplace for non-fungible tokens was launched, which has been struggling in the face of the general collapse in cryptocurrencies.
The company has benefited from a wave of big, blockbuster video game releases, including Hogwarts Legacy in early February; Star Wars Jedi: Survivor in late April, The Legend of Zelda: Tears of the Kingdom in May; and Diablo IV in June. GameStop is still struggling with the consumer shift from game discs to digital downloads that has long tarnished the stock.
Pachter is one of the few sell-side analysts still covering GameStop stock. He has an underperform rating and a price target of $6.50 on his shares, reflecting $4.50 on net cash and a going concern value of $2.
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“They have enough money to stay solvent for a couple of years,” Pachter notes, adding that at some point the company has to find a way to turn a profit.
The stock had held up despite the pessimistic views of many on Wall Street. The company’s biggest fans are Reddit and other social media sites. After shares experienced a parabolic surge in January 2021 due to excitement from some users on Reddit’s WallStreetBets forum, the company has built an online following who think Wall Street undervalues the business.
The sudden sacking of the CEO will be a major test for believers and a win for short sellers who sell borrowed shares to bet on a price decline.
Write to Connor Smith at [email protected]