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GME > SEC Filings for GME > Form 10-Q on 11-Dec-2013All Recent SEC Filings

Show all filings for GAMESTOP CORP.

Form 10-Q for GAMESTOP CORP.


Quarterly Report

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the information contained in our condensed consolidated financial statements, including the notes thereto. Statements regarding future economic performance, management's plans and objectives, and any statements concerning assumptions related to the foregoing contained in Management's Discussion and Analysis of Financial Condition and Results of Operations constitute forward-looking statements. See our Annual Report on Form 10-K for the fiscal year ended February 2, 2013 filed with the Securities and Exchange Commission (the "SEC") on April 3, 2013 (the "Form 10-K"), including the factors disclosed under "Item 1A. Risk Factors," as well as "Disclosure Regarding Forward-looking Statements" and "Item 1A. Risk Factors" below, for certain factors which may cause actual results to vary materially from these forward-looking statements.


GameStop Corp. (together with its predecessor companies, "GameStop," "we," "us," "our," or the "Company") is the world's largest multichannel video game retailer. We sell new and pre-owned video game hardware, physical and digital video game software, accessories, PC entertainment software, new and pre-owned mobile and consumer electronics products and other merchandise primarily through our GameStop, EB Games and Micromania stores. As of November 2, 2013, we operated 6,488 stores in the United States, Australia, Canada and Europe. We also operate electronic commerce Web sites including,,,,,,,, and The network also includes:, a leading browser-based game site; Game Informer magazine, the leading multi-platform video game publication; Spawn Labs, a streaming technology company; a digital PC distribution platform available at; iOS and Android mobile applications; and an online consumer electronics marketplace available at

Our fiscal year is composed of 52 or 53 weeks ending on the Saturday closest to January 31. The fiscal year ending February 1, 2014 ("fiscal 2013") consists of 52 weeks and the fiscal year ended February 2, 2013 ("fiscal 2012") consisted of 53 weeks.

Growth in the electronic game industry is generally driven by the introduction of new technology. Gaming consoles are typically launched in cycles as technological developments in both chip processing speeds and data storage provide significant improvements in advanced graphics, audio quality and other entertainment capabilities beyond video gaming. The previous generation of consoles (the Sony PlayStation 3, the Microsoft Xbox 360 and the Nintendo Wii) was introduced between 2005 and 2007. The Nintendo 3DS was introduced in March 2011 and the Sony PlayStation Vita was introduced in February 2012. The newest console cycle began when Nintendo launched the Wii U in November 2012 as the next generation of the Wii and Sony and Microsoft launched their next generation of consoles, the PlayStation 4 and Xbox One, in November 2013. Typically, following the introduction of new video game consoles, our sales of new video game hardware increase as a percentage of total sales in the first full year following introduction. As video game consoles mature, the sales mix attributable to complementary video game software and accessories, which generate higher gross margins, generally increases in the subsequent years. The net effect is generally a decline in gross margin percentage in the first full year following new console releases and an increase in gross margin percentage in the years subsequent to the first full year following the launch period. The launches of the Sony PlayStation 4 and Microsoft Xbox One are anticipated to reduce our overall gross margin percentage in the fourth quarter of fiscal 2013. Unit sales of maturing video game consoles are typically also driven by manufacturer-funded retail price reductions, further driving sales of related software and accessories. We have seen declines in new hardware and software sales in fiscal 2012 and fiscal 2013 in the previous generation of consoles due to the longevity of the previous console cycle and the anticipated launch of the new consoles.

We expect that future growth in the electronic game industry will also be driven by the sale of video games delivered in digital form and the expansion of other forms of gaming. We currently sell various types of products

Table of Contents

that relate to the digital category, including digitally downloadable content, Xbox LIVE, PlayStation and Nintendo network points cards, as well as prepaid digital and online timecards. We expect our sales of digital products to continue to increase in the near term. We have made significant investments in e-commerce and in-store and Web site functionality to enable our customers to access digital content easily and facilitate the digital sales and delivery process. We plan to continue to invest in these types of processes and channels to grow our digital sales base and enhance our market leadership position in the electronic game industry and in the digital aggregation and distribution category. In addition, we intend to continue to invest in customer loyalty programs designed to attract and retain customers.

In fiscal 2011, we also launched our mobile business and began selling an assortment of tablets and accessories. We also sell and accept trades of pre-owned mobile devices in our stores. We currently sell mobile devices and accessories in all of our stores in the United States and in a majority of stores in our international markets.

Critical Accounting Policies

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and do not include all disclosures required under GAAP for complete financial statements. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. For a summary of significant accounting policies and the means by which we develop estimates thereon, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.

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