After being announced as the new CEO yesterday, GameStop (NYSE:GME) executive Ryan Cohen warned employees they need to be “extremely frugal” and that current losses are unsustainable.
Cohen’s email memo said the retail chain has been “buying bad inventory, using leverage, and running expenses too high.” It took special aim at the latter, saying the company has no use for “delegators and money wasters.” Cohen told employees to treat the company’s money like their own and to lead by example.
There’s no hint in the memo of a new strategy for growth.
GME Stock: Ryan Cohen Takes Over as CEO
Cohen became executive chairman in 2021, after acquiring shares in the year’s meme-stock frenzy. His RC Ventures now has a 12% stake in GME stock. For two years, GameStop tried an online strategy under Matt Furlong, a former Amazon(NASDAQ:AMZN) executive. But Furlong was let go in June.
Cohen made his reputation on Chewy (NASDAQ:CHWY), an online pet retailer he sold to PetSmart (NASDAQ:PETM), which then took it public. He was a billionaire investor when he was drawn into the GameStop frenzy. He will be the ultimate “bag holder” if he can’t save the company, which has been spiraling downward for years as gaming moved online.
GameStop’s second-quarter report showed losses have been cut at the chain, which was founded in the 1980s. Selling, general and administrative expenses fell from 34% of net sales in the second quarter of 2022 to 27.7% this year. The company’s net loss for the most recent quarter was just $2.8 million, compared with $108.7 million a year ago. Restructuring costs during the quarter were $4.3 million. A small profit might be in sight when it reports third-quarter numbers on Dec. 12.
What Happens Next?
Even a marginally profitable retailer with $5 billion in sales isn’t worth $5 billion in today’s market. Cohen needs to bring some retailing magic to GameStop if he’s to successfully pass on the bag. Telling a college-aged workforce they need to tighten their belts makes him sound like grandpa.
As of this writing, Dana Blankenhorn held a LONG position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
