(News Bulletin 247) – The video game distributor announced the dismissal of its general manager, Matt Furlong, after announcing disappointing accounts for the first quarter of its financial year ended at the end of April.

The famous meme stock does not leave the market indifferent. GameStop accustomed to high volatility on the stock market, plunged 19% in early trading on Wall Street on Thursday, after the announcement of a major change in its management. The title erases all the gains made over a month.

The video game distributor has indeed indicated Wednesday evening to separate from its general manager, Matt Furlong. The latter had joined GameStop in 2021 after a stint at the e-commerce giant Amazon.com. The market had sanctioned this unexpected news for the first time, GameStop had already conceded more than 20% in post-market trading on Wednesday.

Matt Furlong had taken office in a very particular context since a few months earlier, GameStop had been the target of an extraordinary speculative fever on the financial markets. Individual investors had then ganged up on forums, such as Reddit, to cause a surge in the action and thus force investors who bet on the decline to unwind their positions.

GameStop’s board of directors has therefore entrusted the group’s controllers to billionaire Ryan Cohen. The company’s largest shareholder through its RC Ventures vehicle has been named executive chairman of the video game retail chain and his responsibilities will include overseeing GameStop’s management and capital allocation.

The general manager pushed towards the exit

The company did not wish to communicate to the market, the reasons that pushed it to do without the services of Matt Furlong. However, this decision comes a few months after GameStop announced that it had returned to profitability.

The video game distributor had published a profit for the last quarter of its financial year ended at the end of January, which did not fail to surprise the market. This is its first profitable quarter for two years. But over the whole of the 2022-2023 financial year, the company remains in a loss, up to 313.1 million euros. GameStop, however, reduced it by 17% compared to the previous year.

Still managing director at the time, Matt Furlong said that GameStop was “on track to be profitable for the full year”. “GameStop is a much healthier business today than it was at the start of 2021,” he said again last March.

A turnaround too long for GameStop

In 2021, Matt Furlong had indeed taken control of a GameStop that had been hard pressed for years in the face of the boom in online sales (directly by game publishers or by platforms such as Steam). His mission was to turn a struggling retailer into a profitable online merchant. But for GameStop, the recovery was slow in coming.

“We believe the combination of these efforts to stabilize and optimize our core business and achieve sustained profitability while focusing on capital allocation under Mr. Cohen’s leadership will unlock long-term value creation for our shareholders,” read GameStop’s quarterly report.

For the board of directors, Ryan Cohen is therefore the man for the job to straighten out GameStop. A finding that is not unanimous among specialists including Michael Pachter of Wedbush Securities, an analyst connoisseur of the video game sector. “Ryan Cohen ‘hasn’t a clue how to turn GameStop around,” he told CNBC.

The announcement of this redesign therefore comes at a critical time for GameStop. The group did not give complete satisfaction, having published quarterly accounts well below Wall Street expectations.

Revenues from the company, which notably owns the Micromania brand in France, continued to decline and were down 10% year-on-year to $1.24 billion in the first quarter of fiscal year 2022-2023. That’s well below the average analyst estimate of $1.36 billion in revenue.

Above all, the group still recorded losses over the past quarter. Although reduced year-on-year, the company suffered a net loss of $50.5 million compared to a loss of $157.9 million in the same period of the 2022-2023 financial year.

A sign that GameStop is going through a difficult patch and that the ousting of Matt Furlong is sensitive, the company has canceled its conference call organized for the announcement of its quarterly accounts.