GameStop’s chief financial officer forced as activist investor proposes new strategy

The people familiar with the matter said the CFO exit Tuesday is one of the elements of the broader clean-up operation at GameStop. Mr Cohen, co-founder of online retailer Chewy for Pets Inc.,

last November announced a nearly 10% stake in GameStop through its investment firm RC Ventures LLC. At the time, Mr. Cohen sent a letter to GameStop’s board asking him to conduct a strategic investigation of the business and reduce its reliance on physical retail, but instead focus on e-commerce.

Although the company’s market value rose temporarily this year and its inventory rose significantly on Wednesday, the brick-and-mortar retailer’s business did not change as dramatically. Revenue has been shrinking for several years at the chain of about 5,000 stores. It faces the same fundamental challenge that booksellers and music retailers face: a shift from physical copies to digital downloads. The company also faced increasing competition from Walmart Inc.

and Amazon.com Inc.

and experience a high executive turnover

Since then, Mr. Cohen is campaigning for several changes at the video game retailer.

GameStop said in January that it had reached an agreement to release Mr. Cohen, former Chewy chief operating officer Alan Attal, and former Chewy chief financial officer Jim Grube join the board. RC Ventures has agreed to increase its stake for a few months to no more than 19.9%.

GameStop also made several important appointments to sharpen the business. The company announced earlier this month that it was hiring Matt Francis, a former CEO of Amazon.com Inc., who took on the newly created role of chief technology officer on February 15th. It also recruited Josh Krueger – who previously worked at Amazon and Walmart. —As vice president of fulfillment. Kelli Durkin, who held the role of vice president of customer service at Chewy, is GameStop’s new senior vice president of customer service.

Mr Cohen said he plans to modernize the company by focusing more on e-commerce and opportunities in technology-driven areas such as sports and mobile gaming, according to a November submission to the Securities and Exchange Commission. He also wants GameStop to terminate leases at less-performing stores and close non-essential operations in Europe and Australia to pay for technology improvements. The company currently operates in 10 countries.

A potential turnaround at GameStop is not yet something Wall Street is betting on. The company, especially Mr. Cohen, must develop a growth strategy and use it to re-engage institutional investors, many of whom have shortened the stock, says Michael Pachter, a research analyst at financial services firm Wedbush Securities Inc. This is a real challenge, ‘said Mr. Pachter said. “But if Ryan Cohen starts showing that it’s a growth story, institutions will come back, the stock will work and everyone will make money.”

Industry analysts see many lucrative revenue options for GameStop, including the use of its brand recognition and reach within the gaming community.

GameStop should focus on its community and encourage people to come to its stores, said Ray Wang, an analyst at consulting firm Constellation Research Inc. “To do the whole Blockbuster-to-Netflix thing, you have to bring the community back to GameStop, from where they went to other social media sites,” Wang said.

GameStop said it has launched its search for a new chief financial officer and plans to appoint its chief accountant Diana Jajeh as interim chief financial officer if he does not get a replacement when Mr. Bell does not leave. The people familiar with the matter are looking for a chief financial officer with a background in e-commerce or technology who can develop strategies in areas such as capital distribution and financing.

—Miriam Gottfried, John McCormick, Angus Loten, and Sarah Needleman contributed to this article.

Write to Nina Trentmann at [email protected] and Mark Maurer at [email protected]