GameStop met several pieces of bad news in its Q1 report: First, revenue fell by more than 10% YoY to $1.24 billion, significantly below the market expectation of $1.36 billion; the company then fired its CEO Matthew Furlong and appointed the board chairman and activist investor Ryan Cohen as executive chairman, effective immediately; even more oddly, the investor call after the earnings report was also canceled. The company's shares dropped more than 20% on Thursday morning. The GameStop, once held high by American retail investors, has seen significant changes.
On the evening of Wednesday, June 7, U.S. stocks after-hours, GameStop announced the Q1 2023 earnings for the period ending on April 29 of this year. The company met several pieces of bad news in its Q1 report: First, the revenue fell by more than 10% YoY to $1.24 billion, significantly below the market expectation of $1.36 billion; then the company fired its current CEO Matthew Furlong and appointed board chairman and activist investor Ryan Cohen as executive chairman, effective immediately; and, oddly enough, the investor call after the earnings report was also canceled. The company's shares plunged nearly 20% after-hours.
After the U.S. stock market opened on Thursday, June 8, the company's stock price continued to fall, opening lower and moving lower, with a drop of more than 20% at one point.
GameStop did not provide a reason for firing Matthew Furlong, but in the registration document stated:
We believe that, under Mr. Cohen's leadership, combining these efforts to stabilize and optimize our core business and achieve sustained profitability, while also focusing on capital allocation, this will further create long-term value for our shareholders.
Cohen is a Canadian activist investor who founded the e-commerce company Chewy. Cohen bought into GameStop in 2020 and, as part of an agreement with the company's management in January 2021, he and two other former Chewy executives were appointed as members of the company's board. Documents show that his investment firm, RC Ventures, currently owns 11.9% of GameStop's shares.
In another securities registration document, GameStop disclosed that Furlong was fired as of Monday this week, and said he would be allowed to receive "salaries and benefits related to unjust dismissal." Furlong also resigned from the company's board of directors on the same day, reducing the number of board members to only five.
The document pointed out that Cohen will be responsible for capital allocation, evaluating potential investments and acquisitions, and overseeing GameStop's equity.
About half an hour after the announcement of Furlong's dismissal, Cohen wrote in a tweet:
It won't be long.
However, Cohen is known for his vague statements on social media.
According to the filing, as part of the leadership reorganization, former Chewy executive and current GameStop board member Alan Attal was appointed as the board's chief independent director. GameStop's general counsel Mark Robinson was appointed as the company's general manager and CEO. The filing said his duties would include "administrative affairs, corporate development, legal affairs and support for GameStop's equity, including oversight of other executives besides Cohen." Robinson will report directly to Cohen and will continue to serve as GameStop's general counsel.
Furlong was appointed as GameStop's CEO in June 2021, at a time when the company was in the early stages of a turnaround plan. The appointment of the former Amazon executive came as GameStop was trying to transition from a long-time brick-and-mortar retailer to a gaming e-commerce player capable of competing with competitors like Walmart, Sony, and Microsoft.
Before taking over as GameStop's CEO about two years ago, Furlong worked for Amazon for nearly nine years. Before leaving Amazon, he was responsible for the growth of Amazon's business in Australia. Prior to that, he had served as a technical advisor to the head of Amazon's North American consumer business and had worked at Procter & Gamble.
According to GameStop's earnings report, revenues from the U.S., Canada, and Australia in the first quarter fell by 16.4%, 18.5%, and 8.9% YoY, respectively, while revenues from Europe grew by 26.2% YoY.
