GameStop Reports Second Quarter 2009 Results

August 20, 2009

Software Growth Expected to Rebound in Second Half

GameStop Gains Over 2% Market Share in Second Quarter

GRAPEVINE, Texas--(BUSINESS WIRE)--Aug. 20, 2009-- GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today reported sales and earnings results for the second quarter ended August 1, 2009.

GameStop sales were $1.74 billion, a 3.7% decrease compared to sales of $1.80 billion in the prior year quarter. Despite gaining over 200 basis points in new video game market share during the quarter, comparable store sales decreased 14.1% due to lower new console unit sales, a lack of strong new software titles compared to last year’s record releases and customer caution due to the continued weak economy.

The top five selling games during the quarter were THQ’s UFC 2009 Undisputed, Activision’s Prototype, EA’s Fight Night Round 4 and NCAA Football 2010, and Atari’s Ghostbusters.

Net earnings were $38.7 million, representing the second highest summer quarter in GameStop history, a 32.3% decrease compared to net earnings of $57.2 million in the prior year period. Diluted earnings per share were $0.23, compared to $0.34 in the prior year quarter, when earnings per share grew 162%.

“Due to the effects of the recession and strong prior year comparisons, the video game industry experienced a sharp decline in consumer spending during the quarter,” said Daniel DeMatteo, GameStop CEO. “Looking ahead, as the new title release schedule improves, we expect positive earnings growth in the back half of the year.”

Updated Guidance

Weak trends in consumer spending related to on-going economic uncertainties, and some key new title slippage such as Bioshock 2, StarCraft II and Splinter Cell: Conviction, have prompted GameStop to forecast a lower and widened earnings range for the remainder of the year. In spite of these challenges, new software sales in the second half are expected to increase over the prior year period, led by highly-anticipated title releases such as Call of Duty: Modern Warfare 2, Assassin’s Creed 2 and Halo 3: ODST.

For the third quarter of fiscal 2009, GameStop is forecasting diluted earnings per share to range from $0.27 to $0.33, as compared to $0.28 in the prior year period. Comparable store sales are projected to range from -11.0% to -6.0%.

For the fourth quarter of fiscal 2009, GameStop is forecasting diluted earnings per share to range from $1.47 to $1.65, as compared to $1.39 in the prior year period. Comparable store sales are projected to range from -7.0% to -1.0%.

For fiscal 2009, GameStop is lowering diluted earnings per share guidance from the previously communicated range of $2.83 to $2.93 to a range of $2.40 to $2.64, representing annual EPS growth of flat to +10%. Comparable store sales are now projected to range from -8.0% to -4.0% in fiscal 2009.

We now expect to generate free cash flow (a non-GAAP measure of operating cash flow less capital expenditures) of approximately $400 to $425 million, after having invested $175 million in capital improvements, including the opening of approximately 400 new stores worldwide.

Note that guidance does not include debt retirement costs or merger-related expenses.

About GameStop

Headquartered in Grapevine, TX, GameStop Corp., a Fortune 500 and S&P 500 company, is the world's largest video game and entertainment software retailer. The company operates 6,333 retail stores in 17 countries worldwide. The company also operates an e-commerce site, GameStop.com, and publishes Game Informer(R) magazine, a leading multi-platform video game publication. GameStop Corp. sells new and used video game software, hardware and accessories for video game systems from Sony, Nintendo, and Microsoft. In addition, the company sells PC entertainment software, related accessories and other merchandise. General information on GameStop Corp. can be obtained at the company's corporate website: http://www.gamestopcorp.com.

Safe Harbor

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, the outlook for fiscal 2009 and beyond, future financial and operating results, projected store openings, the company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of GameStop's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. GameStop undertakes no obligation to publicly update or revise any forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the inability to obtain sufficient quantities of product to meet consumer demand; the timing of release of video game titles for next generation consoles; the risks associated with expanded international operations and the integration of recent acquisitions, including Micromania; the impact of increased competition and changing technology in the video game industry; and economic and other events that could reduce or impact consumer demand. Additional factors that could cause GameStop's results to differ materially from those described in the forward-looking statements can be found in GameStop's Annual Report on Form 10-K for the fiscal year ended January 31, 2009, filed with the SEC and available at the SEC's Internet site at http://www.sec.gov or http://investor.gamestop.com.


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

		13 weeks				13 weeks
		ended				ended
		Aug. 1, 2009				Aug. 2, 2008

Sales	$		1,738,504		$		1,804,420
Cost of sales			1,243,098				1,320,297

Gross profit			495,406				484,123

Selling, general and administrative
expenses			384,773				347,745
Depreciation and amortization			39,677				36,309

Operating earnings			70,956				100,069

Interest expense, net			11,275				9,211

Earnings before income
tax expense			59,681				90,858

Income tax expense			20,996				33,695

Net earnings	$		38,685		$		57,163

Earnings per common share:
Basic		$	0.23			$	0.35
Diluted		$	0.23			$	0.34

Weighted average common shares
outstanding:
Basic			164,636				163,390
Diluted			167,857				168,067



Percentage of Sales:

Sales			100.0	%			100.0	%
Cost of sales			71.5	%			73.2	%

Gross profit			28.5	%			26.8	%

SG&A expenses			22.1	%			19.3	%
Depreciation and amortization			2.3	%			2.0	%

Operating earnings			4.1	%			5.5	%

Interest expense, net			0.7	%			0.5	%

Earnings before income
tax expense			3.4	%			5.0	%

Income tax expense			1.2	%			1.8	%

Net earnings			2.2	%			3.2	%


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

		26 weeks				26 weeks
		ended				ended
		Aug. 1, 2009				Aug. 2, 2008

Sales	$		3,719,257		$		3,618,037
Cost of sales			2,681,738				2,660,508

Gross profit			1,037,519				957,529

Selling, general and administrative
expenses			760,605				676,412
Depreciation and amortization			77,504				71,145

Operating earnings			199,410				209,972

Interest expense, net			22,956				17,699
Debt extinguishment expense			2,862				2,331

Earnings before income
tax expense			173,592				189,942

Income tax expense			64,474				70,654

Net earnings	$		109,118		$		119,288

Earnings per common share:
Basic		$	0.66			$	0.73
Diluted		$	0.65			$	0.71

Weighted average common shares
outstanding:
Basic			164,555				162,607
Diluted			167,915				167,722



Percentage of Sales:

Sales			100.0	%			100.0	%
Cost of sales			72.1	%			73.5	%

Gross profit			27.9	%			26.5	%

SG&A expenses			20.4	%			18.7	%
Depreciation and amortization			2.1	%			2.0	%

Operating earnings			5.4	%			5.8	%

Interest expense, net			0.6	%			0.5	%
Debt extinguishment expense			0.1	%			0.1	%

Earnings before income
tax expense			4.7	%			5.2	%

Income tax expense			1.8	%			1.9	%

Net earnings			2.9	%			3.3	%


GameStop Corp.
Balance Sheets
(in thousands, except per share data)

				Aug 1,		Aug 2,
				2009		2008
ASSETS:
Current assets:
	Cash and cash equivalents		$	197,856	$	539,898
	Receivables, net			40,119		60,966
	Merchandise inventories			1,099,325		970,057
	Prepaid expenses and other current assets			84,898		127,159
	Deferred taxes			22,137		26,893
		Total current assets		1,444,335		1,724,973

Property and equipment:
	Land			11,590		12,033
	Buildings & leasehold improvements			504,595		414,896
	Fixtures and equipment			675,168		583,734
				1,191,353		1,010,663
	Less accumulated depreciation and amortization			612,197		485,665
		Net property and equipment		579,156		524,998

Goodwill, net				1,914,979		1,447,572
Other noncurrent assets				310,467		74,854
		Total assets	$	4,248,937	$	3,772,397


LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
	Accounts payable		$	615,364	$	692,098
	Accrued liabilities			480,287		389,009
		Total current liabilities		1,095,651		1,081,107


Other long-term liabilities				113,493		82,299
Senior notes payable, net of discount				495,807		545,220
		Total liabilities		1,704,951		1,708,626

Stockholders' equity:
	Preferred stock - authorized 5,000 shares; no shares
		issued or outstanding		--		--
	Class A common stock - $.001 par value; authorized 300,000 shares;
		164,661 and 163,653 shares issued and outstanding, respectively		165		164
	Additional paid-in-capital			1,325,492		1,288,727
	Accumulated other comprehensive income			88,721		33,384
	Retained earnings			1,129,608		741,496
		Total stockholders' equity		2,543,986		2,063,771
		Total liabilities and stockholders' equity	$	4,248,937	$	3,772,397


Schedule I
GameStop Corp.
Sales Mix


		13 Weeks Ended				13 Weeks Ended
		Aug 1, 2009				Aug 2, 2008
			Percent				Percent
		Sales	of Total			Sales	of Total
Sales (in millions):

New video game hardware	$	301.3	17.3	%	$	379.7	21.0	%
New video game software		629.8	36.2	%		705.0	39.1	%
Used video game products		560.8	32.3	%		471.5	26.1	%
Other		246.6	14.2	%		248.2	13.8	%

Total	$	1,738.5	100.0	%	$	1,804.4	100.0	%



Schedule II
GameStop Corp.
Gross Profit Mix


		13 Weeks Ended				13 Weeks Ended
		Aug 1, 2009				Aug 2, 2008
			Gross				Gross
		Gross	Profit			Gross	Profit
		Profit	Percent			Profit	Percent

Gross Profit (in millions):

New video game hardware	$	21.6	7.2	%	$	22.6	6.0	%
New video game software		133.6	21.2	%		145.3	20.6	%
Used video game products		256.9	45.8	%		234.1	49.7	%
Other		83.3	33.8	%		82.1	33.1	%

Total	$	495.4	28.5	%	$	484.1	26.8	%

Source: GameStop Corp.

Media Contact:
Chris Olivera
Vice President,
Corporate Communications
GameStop Corp.
(817) 424-2130
or
Investor Contact:
Matt Hodges
Director,
Investor Relations
GameStop Corp.
(817) 424-2130