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GameStop Corp. Sales Up 11%; Second Quarter 2003 EPS of $0.11 Exceeds Consensus Estimates; Video Game Software Sales Increase 31%; GameStop Opens 88 New Stores in Second Quarter

GRAPEVINE, Texas--(BUSINESS WIRE)--Aug. 18, 2003--GameStop Corp. (NYSE:GME), the nation's largest video game and entertainment software specialty retailer, today reported sales and earnings for the second quarter ended August 2, 2003.

GameStop sales increased 11% to $305.7 million in the second quarter of 2003, compared with $274.3 million in the prior year quarter. Video game software sales were very strong, growing by 31%, with leading titles such as "Enter The Matrix" from Atari, Inc., "NBA Street: Volume 2" and "NCAA Football 2004" from Electronic Arts Inc., and "Star Wars: Knights of the Old Republic" from Lucas Arts.

Comparable store sales declined by 4.7% during the second quarter, beating our previously issued guidance. Prior year comparable store sales of 22.9% were fueled by significant hardware price drops that were not repeated in the current fiscal quarter. While video game hardware sales have a significant effect on both revenue growth and comparable stores sales, they have minimal direct impact on operating earnings. Net earnings for the second quarter increased 8% to $6.6 million, or $0.11 per diluted share, at the high end of our previously issued guidance, compared with net earnings of $6.1 million, or $0.10 per diluted share, in the prior year quarter.

New store sales performance in stores opened over the last 18 months, including 88 stores opened during this quarter, exceeded expectations and were a significant contributor to overall sales growth of 11%.

During the second quarter, GameStop acquired a controlling interest in Gamesworld Group Limited, a video game and entertainment software specialty retailer located in Ireland, for approximately $3.1 million. Gamesworld currently operates 11 stores throughout Ireland, as well as a distribution enterprise.

"The second quarter was very successful and marked another milestone in the growth of GameStop. During the quarter we were largely able to minimize the impact of more modest hardware price cuts than anticipated by focusing on the value and promotional aspects of our business to drive incremental sales and to attract new customers," said R. Richard Fontaine, Chairman and CEO. "I am particularly pleased that we capitalized on all sales opportunities across a broad range of platforms. PlayStation 2 titles continued to be strong; PC game sales for key titles were robust, and total Xbox sales accelerated throughout the quarter. In addition, GameBoy Advance SP hardware and software were much in demand during the summer season. As further testimony to the success of the GameStop model, our marketshare once again increased during the second quarter. Finally, with regard to our new partnership with Gamesworld, of Ireland, we believe the merchandising, marketing, and technical refinements of the GameStop model, combined with the leadership of our Irish partners, will provide new growth opportunities throughout Europe."

Guidance for the third quarter is based upon the assumption that the industry will see further hardware price reductions, or similar promotional activities, during the third quarter. Comparable store sales for the third quarter are expected to range from flat to -5.0%, after achieving an increase of 29% in the prior year, with earnings per diluted share between $0.16 and $0.18. We continue to believe that full-year 2003 earnings per diluted share will range from $1.02 to $1.06.

During the first quarter of fiscal 2003, GameStop implemented FASB Emerging Issues Task Force Issue 02-16 (EITF 02-16), which deals with the accounting for vendor rebates, advertising allowances, and other cash consideration received from vendors. EITF 02-16 stipulates that cash consideration received from a vendor should be presumed to be a reduction of the prices of vendors' products and should, therefore, be shown as a reduction in the cost of sales when recognized in the reseller's statements of operations. The only exceptions to this rule are if the vendor receives an identifiable benefit or if the reimbursement is for specific, incremental, identifiable costs. If the amount of cash consideration received exceeds the cost being reimbursed, that excess amount should be characterized as a reduction of cost of sales when recognized in the reseller's statements of operations. This new standard is effective prospectively for new arrangements, including modifications of existing arrangements, entered into after December 31, 2002. We expect that the implementation of EITF 02-16 will reduce fiscal 2003 net earnings by approximately $0.03 per diluted share due to the deferral of vendor allowances reported as a reduction in merchandise inventories. As of August 2, 2003, approximately $1.2 million in vendor allowances have been deferred and will be recognized in cost of sales as the inventory is sold. EITF 02-16 also requires the reclassification of a portion of GameStop's vendor allowances earned in fiscal 2003 from selling, general and administrative expense to cost of goods sold. In Schedules I and II, we have presented both this year's and last year's second quarter and year to date results on a pro forma basis as if EITF 02-16 had been implemented prior to the beginning of fiscal 2002.

A conference call with GameStop Corp.'s management will be simulcast on the Web at (http://www.gamestop.com) beginning at 5:00 PM ET on August 18, 2003, and will be accessible at (http://www.gamestop.com/investor-relations), where it will be archived until September 1, 2003.

About GameStop Corp.

Headquartered in Grapevine, TX, GameStop Corp. (NYSE:GME) is the nation's largest video game and entertainment software specialty retailer. The company operates 1,393 retail stores throughout 49 states, Puerto Rico and Ireland, primarily under the GameStop(R) brand. In addition, the company owns a commerce-enabled Web property, GameStop.com, and Game Informer(R) magazine, a leading video and computer game publication.

GameStop Corp. sells the most popular new software, hardware and game accessories for the PC and next generation video game systems from Sony, Nintendo, and Microsoft, and is also the industry's largest reseller of used video games. In addition, the company sells computer and video game magazines and strategy guides, action figures, and other related merchandise to more than 30 million customers.

Barnes and Noble, Inc. (NYSE:BKS), the world's largest bookseller, has approximately a 60 percent interest in GameStop. General information on GameStop Corp. can be obtained via the Internet by visiting the company's corporate Website: http://www.gamestop.com/investor-relations/

SAFE HARBOR

This press release (including the attached schedules) contains "forward-looking statements." GameStop Corp. is including this statement for the express purpose of availing itself of the protections of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to all such forward-looking statements. These forward-looking statements are based on currently available information and represent the beliefs of the management of the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks include, but are not limited to, general economic and market conditions, seasonality, decreased consumer demand for the company's products, possible disruptions in the company's computer or telephone systems, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores or the inability to obtain suitable sites for new stores, higher than anticipated store closing or relocation costs, higher interest rates, the performance of the company's online and other initiatives, the successful integration of acquired businesses, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, product shortages, and other factors which may be outside of the company's control. In addition, the video game industry has historically been cyclical in nature and dependent upon the introduction of new generation systems and related interactive software. Please refer to the company's reports on file with the SEC for a more detailed discussion of these and other risks that could cause results to differ materially.

 GameStop Corp.
                       Statements of Operations
                (in thousands, except per share data)

                                             13 weeks       13 weeks
                                               ended          ended
                                             August 2,       August 3,
                                                2003            2002
                                           -------------   -----------

Sales                                     $     305,674 $   274,262
Cost of sales                                   216,691       200,817
                                           -------------   -----------

   Gross profit                                  88,983        73,445

Selling, general and administrative
    expenses                                     71,262        57,959
Depreciation and amortization                     6,872         5,623
                                           -------------   -----------

Operating earnings                               10,849         9,863

Interest expense (income), net                     (207)         (368)
                                           -------------   -----------

Earnings before income
     tax expense                                 11,056        10,231

Income tax expense                                4,450         4,113
                                           -------------   -----------

Net earnings                              $       6,606 $     6,118
                                           =============   ===========

Earnings per common share:
     Basic                                $        0.12 $      0.11
     Diluted                              $        0.11 $      0.10

Weighted average common shares
     outstanding:
     Basic                                       56,764        56,843
     Diluted                                     60,193        61,301

Percentage of sales:
------------------------------------------

Sales                                             100.0%       100.0%
Cost of sales                                      70.9%        73.2%
                                           -------------   ----------

Gross profit                                       29.1%        26.8%

SG&A expenses                                      23.3%        21.1%
Depreciation and amortization                       2.2%         2.1%
                                           -------------   ----------

Operating earnings                                  3.6%         3.6%

Interest expense (income), net                        -        (0.1)%
                                           -------------   ----------

Earnings before income
     tax expense                                    3.6%         3.7%

Income tax expense                                  1.4%         1.5%
                                           -------------   ----------

Net earnings                                        2.2%         2.2%
                                           =============   ==========
 GameStop Corp.
                      Statements of Operations
               (in thousands, except per share data)

                                            26 weeks      26 weeks
                                              ended         ended
                                            August 2,      August 3,
                                               2003           2002
                                           -----------   -----------

Sales                                     $   627,415 $   545,667
Cost of sales                                 452,991       403,131
                                           -----------   -----------

   Gross profit                               174,424       142,536

Selling, general and administrative
    expenses                                  139,797       113,216
Depreciation and amortization                  13,089        10,743
                                           -----------   -----------

Operating earnings                             21,538        18,577

Interest expense (income), net                   (586)          125
                                           -----------   -----------

Earnings before income
     tax expense                               22,124        18,452

Income tax expense                              8,907         7,420
                                           -----------   -----------

Net earnings                              $    13,217 $    11,032
                                           ===========   ===========

Earnings per common share:
     Basic                                $      0.23 $      0.20
     Diluted                              $      0.22 $      0.18

Weighted average common shares
     outstanding:
     Basic                                     56,924        55,593
     Diluted                                   60,215        60,002

Percentage of sales:
-------------------------------------------

Sales                                           100.0%      100.0%
Cost of sales                                    72.2%       73.9%
                                           -----------  ----------

Gross profit                                     27.8%       26.1%

SG&A expenses                                    22.3%       20.7%
Depreciation and amortization                     2.1%        2.0%
                                           -----------  ----------

Operating earnings                                3.4%        3.4%

Interest expense (income), net                  (0.1)%        0.0%
                                           -----------  ----------

Earnings before income
     tax expense                                  3.5%        3.4%

Income tax expense                                1.4%        1.4%
                                           -----------  ----------

Net earnings                                      2.1%        2.0%
                                           ===========  ==========
 GameStop Corp.
                            Balance Sheets
                (in thousands, except per share data)

                                                 August 2,   August 3,
                                                   2003        2002
                                                 ----------   --------
ASSETS:
Current assets:
     Cash and cash equivalents                  $  144,147 $152,623
     Receivables, net                                6,213      4,762
     Merchandise inventories                       156,374    132,786
     Prepaid expenses and other current assets      11,054      8,549
     Prepaid taxes                                  13,818        719
     Deferred taxes                                  6,034      3,418
                                                 ----------   --------
          Total current assets                     337,640    302,857
                                                 ----------   --------

Property and equipment:
     Leasehold improvements                         48,072     32,837
     Fixtures and equipment                        112,395     69,742
                                                 ----------   --------
                                                   160,467    102,579
     Less accumulated depreciation and
      amortization                                  68,802     44,293
                                                 ----------   --------
          Net property and equipment                91,665     58,286
                                                 ----------   --------

Goodwill, net                                      320,691    317,957
Other noncurrent assets                              1,470      1,196
                                                 ----------   --------
          Total assets                          $  751,466 $680,296
                                                 ==========   ========


LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
     Accounts payable                           $  120,736 $114,115
     Accrued liabilities                            68,452     55,781
                                                 ----------   --------
          Total current liabilities                189,188    169,896

Deferred taxes                                       5,591      3,065
Other long-term liabilities                          3,410      2,697
                                                 ----------   --------
          Total liabilities                        198,189    175,658
                                                 ----------   --------
Stockholders' equity:
     Preferred stock - authorized 5,000 shares;
      no shares issued or outstanding                    -          -
     Class A common stock - $.001 par value;
      authorized 300,000 shares; 21,439 and
      20,835 shares issued and outstanding,
      respectively                                      21         21
     Class B common stock - $.001 par value;
      authorized 100,000 shares; 36,009
      shares issued and outstanding                     36         36
     Additional paid-in-capital                    496,970    491,333
     Accumulated other comprehensive loss              (75)         -
     Retained earnings                              67,837     13,248
     Treasury stock, at cost, 910 and 0 shares,
      respectively                                 (11,512)         -
                                                 ----------   --------
          Total stockholders' equity               553,277    504,638
                                                 ----------   --------
          Total liabilities and stockholders'
           equity                               $  751,466 $680,296
                                                 ==========   ========
                              Schedule I
                            GameStop Corp.
                  Pro-Forma Statement of Operations
                (in thousands, except per share data)

                                        13 weeks          13 weeks
                                          ended             ended
                                      August 2, 2003 August 3, 2002
                                    ---------------   ----------------

Sales                              $       305,674 $        274,262
Cost of sales (1)                          216,074            196,717
                                    ---------------   ----------------

   Gross profit                             89,600             77,545

Selling, general and
 administrative expenses (1)                71,262             62,119
Depreciation and amortization                6,872              5,623
                                    ---------------   ----------------

Operating earnings                          11,466              9,803

Interest expense (income), net                (207)              (368)
                                    ---------------   ----------------

Earnings before income tax expense          11,673             10,171

Income tax expense                           4,692              4,089
                                    ---------------   ----------------

Net earnings                       $         6,981 $          6,082
                                    ===============   ================

Net earnings per common share:
     Basic                         $          0.12 $           0.11
     Diluted                       $          0.12 $           0.10

Weighted average common shares
    outstanding:
     Basic                                  56,764             56,843
     Diluted                                60,193             61,301

Percentage of sales:
----------------------------------

Sales                                        100.0%             100.0%
Cost of sales                                 70.7%              71.7%
                                    ---------------   ----------------

Gross profit                                  29.3%              28.3%

SG&A expenses                                 23.3%              22.6%
Depreciation and amortization                  2.2%               2.1%
                                    ---------------   ----------------

Operating earnings                             3.8%               3.6%

Interest expense (income), net                   -              (0.1)%
                                    ---------------   ----------------

Earnings before income
     tax expense                               3.8%               3.7%

Income tax expense                             1.5%               1.5%
                                    ---------------   ----------------

Net earnings                                   2.3%               2.2%
                                    ===============   ================

   Footnote to Schedule I:

(1) If GameStop had implemented EITF 02-16 prior to the beginning of
    fiscal 2002, vendor allowances in excess of reimbursement for
    specific, incremental, identifiable costs would have equated to
    $4,160 for the 13 weeks ended August 3, 2002. GameStop would have
    recognized vendor allowances as a reduction in cost of sales
    aggregating $617 during the 13 weeks ended August 2, 2003.
    GameStop would have deferred vendor allowances aggregating $60 as
    a reduction in merchandise inventories during the 13 weeks ended
    August 3, 2002.
                             Schedule II
                            GameStop Corp.
                  Pro-Forma Statement of Operations
                (in thousands, except per share data)

                                         26 weeks         26 weeks
                                           ended            ended
                                       August 2, 2003 August 3, 2002
                                      ---------------  ---------------

Sales                                $       627,415 $       545,667
Cost of sales (1)                            451,457          395,483
                                      ---------------  ---------------

   Gross profit                              175,958          150,184

Selling, general and
 administrative expenses (1)                 139,797          120,993
Depreciation and amortization                 13,089           10,743
                                      ---------------  ---------------

Operating earnings                            23,072           18,448

Interest expense (income), net                  (586)             125
                                      ---------------  ---------------

Earnings before income tax expense            23,658           18,323

Income tax expense                             9,510            7,366
                                      ---------------  ---------------

Net earnings                         $        14,148 $        10,957
                                      ===============  ===============

Net earnings per common share:
     Basic                           $          0.25 $          0.20
     Diluted                         $          0.23 $          0.18

Weighted average common shares
     outstanding:
     Basic                                    56,924           55,593
     Diluted                                  60,215           60,002

Percentage of sales:
----------------------------------

Sales                                          100.0%           100.0%
Cost of sales                                   72.0%            72.5%
                                      ---------------  ---------------

Gross profit                                    28.0%            27.5%

SG&A expenses                                   22.2%            22.1%
Depreciation and amortization                    2.1%             2.0%
                                      ---------------  ---------------

Operating earnings                               3.7%             3.4%

Interest expense (income), net                 (0.1%)             0.0%
                                      ---------------  ---------------

Earnings before income tax expense               3.8%             3.4%

Income tax expense                               1.5%             1.4%
                                      ---------------  ---------------

Net earnings                                     2.3%             2.0%
                                      ===============  ===============

   Footnote to Schedule II:

(1) If GameStop had implemented EITF 02-16 prior to the beginning of
    fiscal 2002, vendor allowances in excess of reimbursement for
    specific, incremental, identifiable costs would have equated to
    $7,777 for the 26 weeks ended August 3, 2002. GameStop would have
    recognized vendor allowances as a reduction in cost of sales
    aggregating $1,534 during the 26 weeks ended August 2, 2003.
    GameStop would have deferred vendor allowances aggregating $129 as
    a reduction in merchandise inventories during the 26 weeks ended
    August 3, 2002.
                            Schedule III
                           GameStop Corp.
                          Retail Sales Mix

                                       13 weeks ended  13 weeks ended
                                          August 2,       August 3,
                                             2003            2002
                                        -------------  ---------------

Video Game Hardware                           16%            22%
Video Game Software                           61%            52%
Video Game Accessories                        12%            12%
PC Software                                    7%             9%
PC Accessories and Other                       4%             5%

    CONTACT: GameStop Corp.
             Media Contact
             Director, Public & Investor Relations
             Lori M. Milovich, 817-424-2130
                 or
             GameStop Corp.
             Investor Contact
             Executive Vice President & Chief Financial Officer
             David W. Carlson, 817-424-2130

    SOURCE: GameStop Corp.