GameStop (NYSE:GME) stock is down 6% in after-hours trading as investors digest a memo that CEO Matt Furlong sent to employees. In the memo, Furlong announced that GameStop would be laying off an unspecified number of employees. He also said that CFO Mike Recupero was departing the company.
According to the memo, these changes come during a massive turnaround for the brick-and-mortar retailer. Furlong wrote that the company added more than 600 corporate employees in 2021. Citing inventory and other supply chain issues, as well as an ongoing transformation into more of an e-commerce establishment, he said GameStop needed to “right size” headcount.
After making more than 600 corporate hires in 2021 and the first half of 2022, we have a stronger understanding of our transformation needs. This has positioned us to right-size headcount across several corporate departments. Today, we’re making a number of reductions to help us keep things simple and operate nimbly with the right talent in place.
Furlong also announced that Recupero would be leaving GameStop and that Chief Accounting Officer Diana Jajeh would be taking his place. As CNBC reported, Recupero was a new recruit by Board Chair Ryan Cohen. CNBC also reports that sources familiar with the decision say that Cohen is responsible for terminating Recupero.
GameStop CFO Mike Recupero, who joined the company about a year ago, was “fired because he was not the right culture fit” and was “too hands off,” a person familiar with the matter told CNBC.
He was pushed out by GameStop chairman Ryan Cohen, the person said.
— Due Diligence (@GMEdd) July 7, 2022
Layoffs Follow GameStop Stock Split News
Just hours before news of the GameStop layoffs, investors were cheering on GME stock. In fact, shares closed up more than 15% during regular trading.
The reason for the Thursday rally was confirmation that GameStop would be enacting a 4-for-1 stock split. Trading on a split-adjusted basis is currently set to occur on July 22. While this will not fundamentally change anything for the company, some investors are hopeful it will help attract a new fan base. This same line of thinking has led to rallies in other stocks pre-split, such as Amazon (NASDAQ:AMZN).
Broadly, GameStop investors are betting on the turnaround strategy with Cohen at the helm. He has promised to make the brick-and-mortar retailer more of an e-commerce specialist. And in recent months, initiatives have focused on the launch of an NFT marketplace and wallet.
As Furlong puts it, the layoffs and termination of Recupero are part of making that transformation happen. He wrote in the memo:
These changes will enable us to operate in a profitable manner as we execute against our strategy of pursuing sales growth in our commerce business and launching new products that empower customers within the digital asset and web3 gaming verticals.
The Bottom Line on GME Stock
It is unclear how GameStop fans will react in the days and weeks to come. For now, they have the task of balancing a promising stock split with layoffs and uncertainty ahead.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Sarah Smith is the Editor of Today’s Market with InvestorPlace.com.
