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GameStop Lays Off Additional Workers, Cuts Crypto Exposure Following Weak Q3

GameStop is undergoing another round of layoffs, according to a post on LinkedIn by a GameStop executive. While the scale of the layoffs is unknown, the cuts are reportedly having a greater impact on the cryptocurrency side of the business, where at least six software engineers have said they were let go, according to Axios.

Kokatu saw an email from CEO Matt Furlong to GameStop employees, but while the message reportedly confirmed the layoffs it didn’t specify the number of affected jobs or which parts of the business were being affected.

“We’ve recently completed several projects that were part of the initial phase of our transformation and enable the business to operate with increased efficiency,” Furlong wrote in the message. “In addition, we’ve continued to gain clarity regarding he right level of corporate staff needed to achieve our profitability and growth goals. These two factors informed the decisions that were taken across the organization.”

The email called the decision to lay off workers “proactive” but “difficult” and put the blame on the high inflation and “weakened consumer confidence” that have been generating headwinds across the retail industry. These factors weighed heavily on GameStop’s results for Q3 2022, which ended Oct. 29. Sales fell to below $1.2 billion, down 8.5% year-over-year.

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GameStop is seeking to reverse course through cost-cutting — the retailer initiated an earlier round of layoffs in July 2022 and replaced its former CFO. The strategy is starting to show some benefit, with selling, general and administrative expenses down to 32.7% of sales in Q3 2022 compared to 34.1% in Q2 2022.

“Now that we are emerging from the rebuilding phase of our transformation, GameStop has a strong foundation from which to pursue profitability in the near term and sustainable growth over the long-term,” Furlong wrote in the message seen by Kokatu.

Additionally, while the retailer didn’t directly mention its crypto or NFT efforts in any of its releases, it appears GameStop may be further stabilizing its operations by stepping back some of its initial investments in the space.

“The company has proactively minimized exposure to cryptocurrency risk throughout the year and does not currently hold a material balance of any token,” said Furlong during a call with investors. “Although we continue to believe there is long-term potential for digital assets in the gaming world, we have not and will not risk meaningful stockholder capital in the space.”

The caution may be due to a short-lived partnership with now-defunct crypto exchange FTX. The two companies began working together in mid-September as part of GameStop’s effort to establish a digital asset marketplace, but both parties had agreed to dissolve the agreement by Nov. 11 when FTX filed for Chapter 11 bankruptcy.

Despite the hiccups, GameStop’s NFT strategy seems to still be moving forward: the beta for its marketplace, which launched on Oct. 31, remains active.

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