GameStop’s survival demands ‘extreme frugality,’ CEO tells employees

A GameStop location on sixth Avenue in Recent York on March 23, 2021.

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Just hours after being named GameStop‘s CEO, Ryan Cohen sent out a memo to employees Thursday that emphasized he’ll take dramatic steps to make sure the struggling video game retailer survives.

“Our job is to make certain GameStop is here for a long time to come back,” he wrote in the e-mail that was sent to corporate employees and store leaders and obtained by CNBC. “Extreme frugality is required. Every expense at the corporate have to be scrutinized under a microscope and all waste eliminated. The corporate has no use for delegators and money wasters. I expect everyone to treat company money like their very own and lead by example.”

Cohen, a billionaire activist investor and founding father of direct-to-consumer pet food and provide retailer Chewy, was named the corporate’s recent leader Thursday morning. He was previously executive chair of GameStop. As of late June, his firm RC Ventures was the corporate’s largest shareholder with a 12.09% stake, based on FactSet.

Cohen’s CEO announcement previewed the corporate’s emphasis on slashing costs: He is not going to receive a salary in his recent role.

Cohen became an integral a part of the “meme stock” frenzy, as he invested in firms including now bankrupt Bed Bath & Beyond. He joined GameStop’s board in 2021 within the thick of the phenomenon.

Cohen’s recent role kicks off the newest chapter of GameStop’s effort to reinvent itself. The Grapevine, Texas-based retailer, which was founded within the Nineteen Eighties, built its business on selling video games, consoles and other gaming merchandise.

Yet as customers buy video games online, it has fallen from relevance and needed to chase recent ways make cash. It has experimented with recent businesses, resembling launching an NFT marketplace and striking a partnership with now bankrupt cryptocurrency exchange FTX.

The corporate has also handled major leadership changes. With Cohen on its board, GameStop tapped multiple Amazon veterans, including Matt Furlong, who became CEO, and Mike Recupero, who became chief financial officer.

Yet GameStop fired each of those leaders. Cohen got the highest job nearly 4 months after the corporate ousted Furlong.

GameStop shares closed at $16.84 on Thursday and have fallen nearly 9% this yr. The closing price was lower than 1 / 4 of its all-time high close of greater than $86 a share in January 2021.

Earlier this month, GameStop reported a second-quarter net lack of $2.8 million, in comparison with a $108.7 million loss within the prior-year period.

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Read the complete memo below:

Subject: Survival
 
I shall be straight to the purpose.
 
It is just not sustainable for GameStop to operate a money losing business. The mission is to operate hyper efficiently and profitably. Our expense structure must allow us to endure any antagonistic scenario. Whether it is a difficult economy or revenue deceleration from shrinking software, we have to be profitable. Our job is to make certain GameStop is here for a long time to come back. Extreme frugality is required. Every expense at the corporate have to be scrutinized under a microscope and all waste eliminated. The corporate has no use for delegators and money wasters. I expect everyone to treat company money like their very own and lead by example.
 
Prospering in retail means survival. If we survive, we stay in the sport. Survival is avoiding the deadly sins that usually lead retailers to self-destruct. This is generally a results of the next – buying bad inventory, using leverage, and running expenses too high. By avoiding these self-inflicted mistakes and specializing in the fundamentals, GameStop might be here for a very long time.
 
I expect everyone to roll up their sleeves and work hard. I’m not getting paid, so I’m either taking place with the ship or turning the corporate around. I much prefer the latter.
 
It won’t be easy. Better of luck to us all.
 
Ryan

This story is developing. Please check back for updates.

— CNBC’s Gabrielle Fonrouge contributed to this report.