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GameStop Reports Sales and Earnings for Fiscal 2010

March 24, 2011
GameStop Achieves Record Sales and Net Earnings
Digital Sales Increase 61%
2010 EPS Grows 18%

GRAPEVINE, Texas, Mar 24, 2011 (BUSINESS WIRE) -- GameStop Corp. (NYSE: GME), the world's largest multichannel video game retailer, today reported record sales and earnings for the fourth quarter and the fiscal year ended January 29, 2011.

Financial Results

Total sales for the fourth quarter of 2010 increased 4.8% to $3.69 billion, in comparison to $3.52 billion in the prior year quarter. Comparable store sales increased 2.6%. Net earnings increased 10.1% to $237.8 million, as compared to net earnings of $215.9 million in the prior year quarter. Diluted earnings per share increased 20.9% to $1.56, as compared to $1.29 in the prior year quarter.

For fiscal year 2010, total sales increased 4.3% to an all-time high of $9.47 billion, in comparison to $9.08 billion in fiscal 2009. Comparable store sales increased 1.1%. Through our multichannel network, GameStop customers purchased $290 million of console and PC digital offerings in 2010, a 61% increase over 2009.

Net earnings increased 8.1% to a record $408.0 million, including debt retirement costs of $6.0 million ($3.8 million, net of tax benefits), as compared to fiscal 2009 net earnings of $377.3 million, including debt retirement costs of $5.3 million ($3.3 million, net of tax benefits). Diluted earnings per share grew 17.8% to $2.65, including debt retirement costs of $0.02 per share, as compared to $2.25, including debt retirement costs of $0.02 per share, in fiscal 2009.

Paul Raines, chief executive officer, stated, "In 2010, our innovations in e-commerce, digital offerings and PowerUp Rewards(TM) helped drive record sales, earnings and market share. Our focus in 2011 is to build on the success of our PowerUp Rewards program, expand our used business and increase our digital revenues, all while delivering strong financial results."

Rob Lloyd, chief financial officer, said, "In 2010, GameStop generated more than $590 million of operating cash flow. We returned more than $380 million to shareholders through stock repurchases, reduced debt by $200 million as well as funded our new initiatives, digital acquisitions and global expansion. Overall, we begin 2011 in a position of financial strength and remain on track to meet our long-term return on invested capital (ROIC) goal."

Share Repurchase Update

During the fourth quarter, GameStop purchased 5.4 million shares at an average price of $20.77, or $112 million worth of stock. In February 2011, $500 million was approved to be used for share repurchases and debt retirement over the next 18 months, replacing the existing authorization. In fiscal 2011, GameStop has purchased 5.9 million shares at an average price of $19.88, or $118 million worth of stock.

Earnings Guidance

The following table provides detailed elements of our sales and earnings guidance for our 2011 first quarter and full year, based on current industry expectations and modest economic improvement.

First Quarter Fiscal Year 2011
Net Sales Increase 6.0% to 8.0% 6.0% to 8.0%
Comparable Store Sales 4.0% to 6.0% 3.5% to 5.5%
Depreciation & Amortization Expense (in millions) $44.0 to $46.0 $180.0 to $190.0
Income Tax Rate 35.0% to 36.0% 35.5% to 36.5%
Weighted Average Shares Outstanding 143,500,000 142,500,000
Diluted Earnings Per Share $0.53 to $0.55 $2.82 to $2.92

In 2011, GameStop will continue to invest in strategic initiatives begun in 2010 in order to increase market share and drive digital sales growth. Our fiscal 2011 operating plan includes incremental costs of approximately $26 million, or $0.12 per share, for these projects.

GameStop's fiscal 2011 capital expenditure budget of $170 million includes spending in the following categories:

  • $100 million in digital initiatives, technology systems and loyalty program support
  • $70 million for store remodels and store openings

For 2011, in the U.S., GameStop expects to open approximately 200 new stores, focusing on underserviced markets. The company also expects to close 200 stores, primarily those overlapping store locations due to past acquisitions with expiring leases. We will use our PowerUp Rewards loyalty program database to more effectively communicate with customers and thereby improve the sales transfer rate and overall store profitability. We expect to pursue opportunistic growth internationally.

Note that guidance only includes the effect of the shares purchased thus far in fiscal 2011 from the $500 million share and debt repurchase plan authorized in February 2011.

Conference Call and Webcast Information

A conference call with GameStop Corp.'s management is scheduled for March 24, 2011 at 10:00 a.m. Central Time to discuss the fourth quarter and fiscal year end sales and earnings results. The conference call will be simulcast on the Internet at http://investor.gamestop.com. The conference call will be archived on the website until April 24, 2011.

About GameStop

GameStop Corp. (NYSE: GME), a Fortune 500 and S&P 500 company headquartered in Grapevine, Texas, is the world's largest multichannel video game retailer. GameStop's retail network and family of brands include 6,670 company-operated stores in 17 countries worldwide; http://www.Kongregate.com, a leading browser-based game site with more than 12 million monthly unique visitors; and Game Informer(R) magazine, the leading multi-platform video game publication. The company also sells video games and related merchandise at http://www.GameStop.com. General information on GameStop Corp. can be obtained at the company's corporate website. Follow GameStop on Twitter @ http://www.twitter.com/GameStop and find GameStop on Facebook @ http://www.facebook.com/GameStop.

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 2011, 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, including console hardware and accessories; the timing of release of video game titles for next generation consoles; the risks associated with expanded international operations and the integration of acquisitions; the impact of increased competition and changing technology in the video game industry, including browser and mobile games and alternative methods of distribution; and economic, regulatory and other events, including litigation, that could reduce or impact consumer demand or affect the company's business. 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 30, 2010 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 millions, except per share data)
13 weeks 13 weeks
ended ended
Jan. 29, 2011 Jan. 30, 2010
Sales $ 3,692.8 $ 3,524.0
Cost of sales 2,789.1 2,649.9
Gross profit 903.7 874.1
Selling, general and administrative
expenses 482.7 483.3
Depreciation and amortization 45.3 43.4
Operating earnings 375.7 347.4
Interest expense, net 6.0 9.8
Earnings before income
tax expense 369.7 337.6
Income tax expense 131.9 123.2
Consolidated net income 237.8 214.4
Net loss attributable to noncontrolling interests 0.0 1.5
Consolidated net income attributable to GameStop $ 237.8 $ 215.9
Net income per common share:
Basic1 $ 1.58 $ 1.31
Diluted1 $ 1.56 $ 1.29
Weighted average common shares
outstanding:
Basic 150.9 164.3
Diluted 152.1 167.6

Percentage of Sales:
Sales 100.0 % 100.0 %
Cost of sales 75.5 % 75.2 %
Gross profit 24.5 % 24.8 %
SG&A expenses 13.1 % 13.7 %
Depreciation and amortization 1.2 % 1.2 %
Operating earnings 10.2 % 9.9 %
Interest expense, net 0.2 % 0.3 %
Earnings before income
tax expense 10.0 % 9.6 %
Income tax expense 3.6 % 3.5 %
Consolidated net income 6.4 % 6.1 %
Net loss attributable to noncontrolling interests 0.0 % 0.0 %
Consolidated net income attributable to GameStop 6.4 % 6.1 %

1 Basic net income per share and diluted net income per share are calculated based on consolidated net income

attributable to GameStop.
GameStop Corp.
Statements of Operations
(in millions, except per share data)
52 weeks 52 weeks
ended ended
Jan. 29, 2011 Jan. 30, 2010
Sales $ 9,473.7 $ 9,078.0
Cost of sales 6,936.1 6,643.3
Gross profit 2,537.6 2,434.7
Selling, general and administrative
expenses 1,700.3 1,635.1
Depreciation and amortization 174.7 162.6
Operating earnings 662.6 637.0
Interest expense, net 35.2 43.2
Debt extinguishment expense 6.0 5.3
Earnings before income
tax expense 621.4 588.5
Income tax expense 214.6 212.8
Consolidated net income 406.8 375.7
Net loss attributable to noncontrolling interests 1.2 1.6
Consolidated net income attributable to GameStop $ 408.0 $ 377.3
Net income per common share:
Basic1 $ 2.69 $ 2.29
Diluted1 $ 2.65 $ 2.25
Weighted average common shares
outstanding:
Basic 151.6 164.5
Diluted 154.0 167.9

Percentage of Sales:
Sales 100.0 % 100.0 %
Cost of sales 73.2 % 73.2 %
Gross profit 26.8 % 26.8 %
SG&A expenses 18.0 % 18.0 %
Depreciation and amortization 1.8 % 1.8 %
Operating earnings 7.0 % 7.0 %
Interest expense, net 0.4 % 0.4 %
Debt extinguishment expense 0.0 % 0.1 %
Earnings before income
tax expense 6.6 % 6.5 %
Income tax expense 2.3 % 2.4 %
Consolidated net income 4.3 % 4.1 %
Net loss attributable to noncontrolling interests 0.0 % 0.1 %
Consolidated net income attributable to GameStop 4.3 % 4.2 %
1 Basic net income per share and diluted net income per share are calculated based on consolidated net income
attributable to GameStop.
GameStop Corp.
Balance Sheets
(in millions, except per share data)
Jan. 29, Jan. 30,
2011 2010
ASSETS:
Current assets:
Cash and cash equivalents $ 710.8 $ 905.4
Receivables, net 65.5 64.0
Merchandise inventories 1,257.5 1,053.6
Prepaid expenses and other current assets 92.2 83.1
Deferred taxes 28.8 21.2
Total current assets 2,154.8 2,127.3
Property and equipment:
Land 24.0 11.5
Buildings & leasehold improvements 577.2 523.0
Fixtures and equipment 817.8 711.5
1,419.0 1,246.0
Less accumulated depreciation and amortization 805.2 661.8
Net property and equipment 613.8 584.2
Goodwill, net 1,996.3 1,946.5
Other noncurrent assets 298.9 297.3
Total assets $ 5,063.8 $ 4,955.3
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 1,028.1 $ 961.7
Accrued liabilities 719.7 694.0
Total current liabilities 1,747.8 1,655.7
Other long-term liabilities 171.1 129.3
Senior notes payable, net of discount 249.0 447.3
Total liabilities 2,167.9 2,232.3
Stockholders' equity:
Preferred stock - authorized 5.0 shares; no shares
issued or outstanding -- --
Class A common stock - $.001 par value; authorized 300.0 shares;
146.0 and 158.7 shares outstanding, respectively 0.1 0.2
Additional paid-in-capital 928.9 1,210.5
Accumulated other comprehensive income 162.5 114.7
Retained earnings 1,805.8 1,397.8
Equity attributable to GameStop Corp. stockholders 2,897.3 2,723.2

Equity (deficit) attributable to noncontrolling interest

(1.4 ) (0.2 )
Total equity 2,895.9 2,723.0
Total liabilities and stockholders' equity $ 5,063.8 $ 4,955.3
Schedule I
GameStop Corp.
Sales Mix
13 Weeks Ended 13 Weeks Ended
Jan. 29, 2011 Jan. 30, 2010
Percent Percent
Sales of Total Sales of Total
Sales (in millions):
New video game hardware $ 781.4 21.2 % $ 737.9 20.9 %
New video game software 1,593.4 43.1 % 1,561.2 44.3 %
Used video game products 805.6 21.8 % 777.1 22.1 %
Other 512.4 13.9 % 447.8 12.7 %
Total $ 3,692.8 100.0 % $ 3,524.0 100.0 %
52 Weeks Ended 52 Weeks Ended
Jan. 29, 2011 Jan. 30, 2010
Percent Percent
Sales of Total Sales of Total
Sales (in millions):
New video game hardware $ 1,720.0 18.1 % $ 1,756.5 19.3 %
New video game software 3,968.7 41.9 % 3,730.9 41.1 %
Used video game products 2,469.8 26.1 % 2,394.1 26.4 %
Other 1,315.2 13.9 % 1,196.5 13.2 %
Total $ 9,473.7 100.0 % $ 9,078.0 100.0 %
Schedule II
GameStop Corp.
Gross Profit Mix
13 Weeks Ended 13 Weeks Ended
Jan. 29, 2011 Jan. 30, 2010
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
Gross Profit (in millions):
New video game hardware $ 56.2 7.2 % $ 40.9 5.5 %
New video game software 321.0 20.1 % 322.2 20.6 %
Used video game products 355.8 44.2 % 360.7 46.4 %
Other 170.7 33.3 % 150.3 33.6 %
Total $ 903.7 24.5 % $ 874.1 24.8 %
52 Weeks Ended 52 Weeks Ended
Jan. 29, 2011 Jan. 30, 2010
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
Gross Profit (in millions):
New video game hardware $ 124.9 7.3 % $ 113.5 6.5 %
New video game software 819.6 20.7 % 795.0 21.3 %
Used video game products 1,140.5 46.2 % 1,121.2 46.8 %
Other 452.6 34.4 % 405.0 33.8 %
Total $ 2,537.6 26.8 % $ 2,434.7 26.8 %

SOURCE: GameStop Corp.

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