GameStop is profitable for the first time in years, but at whose expense?

GameStop made money in the last quarter of 2022, something it hasn’t done in years. The surprising financial results were posted Wednesday, with the company reporting earnings of $48.2 million. GameStop lost $147.5 million in the same period last year, for reference – but, ironically, made more sales during that time. How did GameStop make money this quarter, even with fewer sales? The company has drastic cutting costs, sometimes at the expense of employees, GameStop employees told Polygon.

“GameStop is a much healthier company today than it was in early 2021,” said CEO Matt Furlong, who earned nearly $17 million (rough ¹9/11₃ of Q4’s 2022 earnings) in 2021. The shocking earnings report caused GameStop shares up 35% on Wednesday.

Furlong attributed GameStop’s profitability to its growing collectibles, in addition to improvements to its online store and shipping capabilities. But the gains are more likely tied to GameStop’s massive drop in operating costs due to layoffsshop closures and reduced working hours for employees.

“This pivot, of course, included reducing headcount as we streamlined operations and cultivated a fast-paced, intense work environment focused on cost control, efficiency and profitability,” said Furlong. Furlong expects to “continue to aggressively cut costs” in 2023 and beyond. Europe in particular is a market where GameStop intends to cut costs; Furlong said the company has already begun winding down operations in some countries.

Employees told Polygon in February that one of these cost-cutting measures is forcing stores into single coverage, meaning one person working in a store at a time. It has created an environment that people call “dangerous” and exhausting; not only is there an increased risk of robberies, but Game Stop employees report being unable to leave for breaks and struggling to manage customers in the store and answer phone calls. Employees are exhausted by consistently demoralizing corporate decision-making, they said.

GameStop may have been profitable last quarter, but there’s a limit to how much cost cutting the company’s employees will endure.