GameStop lays off more than 50 in latest step on long road to financial recovery

Mike Futter

GameStop lays off more than 50 in latest step on long road to financial recovery

GameStop share price continues to sink as company struggles to regroup in the face of digital distribution and subscription gaming.

Mike Futter,Thu, 01 Aug 2019 15:33:00

It’s been less than two months since GameStop announced it was closing its beloved ThinkGeek brand. The protracted layoffs began in 2018, when the company shuttered its Denver office, continuing through June when financial pressures led GameStop to sunset the brand and lay off its remaining staff.

Now, GameStop has shared with its staff that it is laying off more than 50 employees. GameDaily received a tip that layoffs took place affecting district and regional managers, human resources staff, and loss prevention employees. An internal email shared to Twitter (h/t Gamasutra) lays out the reasoning and impact of the corporate reorganization the company is calling “GameStop Reboot.”

We have important news to share with you today concerning the redesign of our Field Leadership team. As part of our continued GameStop Reboot transformation initiative, a dedicated team, including the Retail Vice Presidents, HR, LP and the U.S. Store Operations leadership team, have been working diligently to realign our current field regions and districts in an effort to reduce our cost structure and build efficiencies into our field leadership organization so that we can reinvest in the business.

This realignment results in an expanded size of GameStop’s regions and districts, therefore reducing the number of field leaders required to run the organization. The realignment also allows for a reset of the GSL reporting structure, enabling these new multi-unit leader’s ownership in their span of control. More details to come on the GSL process.

Unfortunately, with these changes, there are more than 50 field leaders who have been impacted and will be leaving the GameStop team. This includes regional, district, HR, and LP leaders. These leaders will be missed and we wish them success in their future endeavors.

These decisions are not easy, but necessary to help us reduce costs to enable investment in revenue-driving initiatives that will help grow the business once again. There is more work to be done to streamline the number of tasks for our field leaders and provide tools to support their daily activities. This work has already begun and will continue moving forward. 

It seems that GameStop is hoping to increase its regional footprints and add more responsibility to those who survived this round of layoffs. The note in the final paragraph also implies that GameStop hasn’t entirely solidified how this additional workload will be handled efficiently by its remaining field managers.

GameStop did not respond to GameDaily’s request for comment by publication. We’ll update should we receive a response.

As we reported in June, GameStop’s woes come from its years-long reliance on the used game market. The company’s bread-and-butter was leveraging the supply and demand realities of a video game ecosystem that only existed in physical copies. The advent of digital distribution and its massive growth over the current console generation has disrupted that so severely that GameStop has had to chase new forms of revenue in refurbished mobile devices, board games, and collectibles. This has led to a retail presence that felt cluttered and disorganized.

GameStop is betting now on collectibles, centralizing its now-retired ThinkGeek business with its core video game operation. The company is also hoping to revitalize itself as a gathering place and has also made moves to create its own esports arena

Wall Street isn’t convinced, though. GameStop’s (GME) share price has continued to slide ($4.04 at time of publication, down from about $50 in 2015) and some analysts seem to be preparing for GameStop’s funeral. Others remain hopeful that GameStop will find a buyer, even though it failed before. That would likely mean a leveraged buyout (LBO), the same type of acquisition that saddled Toys R Us with so much debt it buckled under the weight. In all likelihood, a buyout of that type would make some investors quite rich while leaving shareholders and employees out in the cold.

In an ideal scenario, a leveraged buyout takes the company private so it can be rehabbed and then taken public once more. Any shareholder that hangs on in that situation is likely to benefit, but as Toys R Us teaches, the goals of an LBO may not be that generous.

GameStop completed a tender offer in early July, repurchasing 11.7% of its outstanding shares of common stock at $5.20 per share. As this was a tender offer, the per share value was higher than market price.

GameStop is still floundering, though management has a plan to restore the company to its former financial glory. The question is whether it will execute in time to pull out of the tailspin.

Disclosure: Michael Futter served as the news editor of Game Informer from 2013 - 2016. Game Informer is owned by GameStop.