GameStop shocked investors, and anyone else who’s been paying attention to the meme stock video game retailer, when earlier this week it reported its first profitable quarter in over two years. It’s all the more surprising considering that everything else about the business, from botched pre-orders to employees just walking out of stores and never coming back, paints a completely different picture.
“GameStop is a much healthier business today than it was at the start of 2021,” CEO Brad Furlong said on a quarterly earnings call on Tuesday. The company announced $48.2 million in profits for the fourth quarter, a dramatic shift from $147.5 million in losses the year prior. Its meme stock jumped a whopping 50 percent overnight as a result.
Furlong pointed to increased collectibles sales (read: Star Wars Funkos, Dragon Ball Z statues, and Transformers helmets) and promoted the company’s recent overhaul of shipping tools and the website. But the real key seemed to be mounting “cost cutting initiatives and headcount reductions” throughout 2022. GameStop has been squeezing store employees more than ever, leading some to quit in protest. Furlong promised to “aggressively cut costs” even more in the year to come.
Despite all this, holiday sales were actually down year-over-year. GameStop sold over $230 million worth of its inventory compared to 2022, possibly linked to employees being asked to sell all kinds of random junk they’d never seen before in recent months. What likely made up the difference was a dramatic fall in operating expenses, which fell $85 million from a year ago, no doubt driven by layoffs, closures, and consolidation.
“Cost cuts of this magnitude are unlikely sustainable longer-term,” wrote Yahoo! Finance editor Brian Sozzi. “At some point GameStop will have to figure out a way to grow sales if it wants to drive consistent profits.”
Furlong, who made $16.8 million in 2021, started Tuesday’s earnings call by thanking employees for their hard work and dedication, but they are precisely the ones scratching their heads at how the company can continue burning through staff morale and customer goodwill for short-term savings.
Many store managers are now in charge of two stores, rather than the previously standard one, without seeing any significant pay raise. Lower-level employees are working single-coverage shifts, struggling to find time to use the bathroom or eat meals, let alone deal with fears of being robbed or harassed by weird customers. And bungled pre-orders for hard-to-find games or limited edition collectibles have led to all sorts of headaches after a glitchy software overhaul last fall.
Most recently, some employees joked about putting in their two weeks notice rather than call dozens of loyal customers to explain why their Resident Evil 4 Remake Collector’s Editions were suddenly canceled just weeks before release with no explanation. At the same time, new sales metrics for 2023 are more aggressive than ever, including tracking how many customers enter a store and leave without buying anything.
Early on in GameStop’s meme stock mania, there was the belief that it could pivot to a primarily-online sales model. After all, new board chairman Ryan Cohen did precisely that for pet food with Chewy and made billions in the process. But the lifeblood of GameStop has always been in-person cash trade-ins, making those Amazon-ificaton efforts more complicated than they might have first seemed. A crypto pivot appears to have fizzled out as well, with a marketplace for NFTs never taking off and a wallet launch hampered by the historic implosion of business partner FTX.
One sure fire way to make an extra buck though? Slash payrolls and make employees do more with less.