About Gamestop Corp.

GameStop holds the top score in video game retailing. The largest retailer of new and used games, hardware, entertainment software, and accessories boasts over 4,100 GameStop, EB Games, and Micromania branded stores in the US and 1,500-plus stores in Europe, Australia, and Canada. Its stores and e-commerce websites stock more than 5,000 video game related items, with more than half of its sales coming from new video game hardware and software. GameStop also sells downloadable add-on content from publishers, operates nearly 500 smartphone retail locations (under the AT&T, Cricket Wireless, Simply Mac, and Spring Mobile banners), and publishes video game magazine Game Informer.

Operations

The company operates five business segments, of which four are based on store and e-commerce sales in their respective geographic markets: United States, which counts sales for its 4,138 stores (as of the end of fiscal 2015, ended January 31) in the US and US territories, www.gamestop.com, Game Informer Magazine, and its web and mobile gaming platform Kongregate; Europe (1,316 stores); Australia (421 stores); and Canada (331 stores). Its Technology Brands segment (4% of sales) includes its Spring Mobile business, which sells post-paid AT&T services and wireless products through 361 AT&T branded stores and pre-paid AT&T services and related accessories through its 63 Cricket-branded stores; its Simply Mac business, which is an Apple reseller that sells Apple electronic products through 60 stores. Beyond its stores, GameStop operates more than a dozen e-commerce sites.

By product, GameStop generated 33% of its total sales from new video game software in FY2015, while about 26% of sales came from pre-owned and value video game products and software. The rest of its sales came from new video game hardware sales (22% of sales), video game accessories (7% of sales), mobile and consumer electronics (6% of sales), digital download services (2% of sales), and other sources.

GameStop's stores are supported by several distribution centers strategically located to serve its global network of stores. Distribution centers in Texas and Kentucky serve the US segment, further supported by third-party distribution centers for new release titles. GameStop distributes merchandise to its Canadian stores from distribution centers in Ontario. It has a distribution center near Brisbane, Australia, that supports its Australian operations and a small distribution facility in New Zealand for stores in New Zealand. GameStop's European segment gets its merchandise from half a dozen regionally-located distribution centers.

Geographic Reach

GameStop has a presence in 14 countries worldwide, including 10 European countries, North America, and the Asia Pacific region. More than two thirds of its stores are based in the US, where 66% of its sales came from in FY2015. It also maintains a healthy footprint in Europe (which accounted for 18% of sales). The remainder of its sales come from its stores in Australia (7% of sales) and Canada (5% of sales).

Sales and Marketing

The company considers itself a destination location for gamers. It develops relationships with video game enthusiasts through its PowerUp Rewards loyalty program by allowing US consumers to trade in used video games for store credits on future purchases in its stores, on its US website, and on Kongregate.com. Its PowerUp Rewards program provides members with the opportunity to earn unique video game related rewards not available through any other retailer. Vendors also participate in this program to increase the sales of their individual products. It also has loyalty programs in France, Italy, Germany, Australia, and Spain. Altogether, its various loyalty programs total more than 41 million members.

In 2014, the company's GameStop Technology Institute unit established a partnership with AT&T to improve the speed and reliability of its in-store promotional materials and enhance customers' experiences.

Altogether, GameStop spent $64.1 million in advertising in FY2015 (up from $57.8 million and $63.9 million in fiscal years 2014 and 2013, respectively), and focused on newspapers, television, and other media. As part of its brand-building efforts and targeted growth strategies, the games retailer has been expanding its advertising and promotional activities in certain targeted markets at key times of the year. Additionally, GameStop expanded the use of television and radio advertising in certain markets to promote brand awareness and store openings. It's also working to leverage its loyalty programs to boost its membership base and is adding loyalty programs in international markets to build its brand.

Financial Performance

GameStop's sales and profits have rebounded since FY2013, as it's remedied slumping video game retail sales by building its relatively newer Technology Brand businesses, which sell smartphones and related accessories, with hundreds of new store openings (mainly under the AT&T banner).

The game retailer's revenue jumped 3% to $9.3 billion in fiscal 2015 (ended January 31) thanks to a 3.4% increase in same-store sales stemming mostly from a 17% in new video game hardware sales stemming from the relatively recent launches of the Microsoft  XBox One and the Sony PlayStation 4 consoles. The company's Technology Brands businesses also added significantly to GameStop's top-line growth, growing by more than five-fold during the year as the retailer acquired more than 250 new smartphone-related stores.

Higher sales and lower goodwill impairment and depreciation and amortization costs (as it sold more of its struggling video game stores) in FY2015 boosted GameStop's net income by 11% to $393.1 million for the year. Despite higher earnings, the retailer's operating cash levels declined 37% to $480.5 million due to unfavorable working capital changes mostly related to the timing of accounts payable and accrued liabilities payments.

Strategy

Gamestop hopes to keep its title as the world's leading seller of new and used video game products by targeting hardcore gamers, as well as those niche customers who purchase games as gifts during the holidays. However, with its video game retail sales shrinking globally in recent years, the retailer has been closing more game stores in favor of acquiring more smartphone retail outlets to grow its relatively new Technology Brands business. Indeed, since it started the division in 2013, the company has closed around 400 gaming stores (net, as of the end of FY2015) while growing its Technology Brand store base to 484 outlets under the AT&T, Cricket Wireless, Simply Mac, Aio Wireless, and Spring Mobile banners.

Also in light of slumping retail sales, GameStop has been trying to grow its business through video games that are delivered to users in digital form and from the expansion of other forms of gaming. Products that relate to the digital category, including Xbox Live, PlayStation, and Nintendo network points cards, as well as prepaid digital and online timecards and digitally downloadable software. To this end, the company continues to investment in e-commerce, digital delivery systems, mobile applications, online video game aggregation, and in-store and website functionality. It also plans to invest in these processes and channels to grow its digital sales base and boost its market leadership position in the electronic game industry and in the digital aggregation and distribution category.

GameStop's used video game products have lured more frugal customers who want to stay in the game even with tighter budgets in the years following the last recession. That bodes well for GameStop, as used game products carry higher-profit margins, and represents the company's most profitable product segment. However, GameStop has faced new competition from Wal-Mart Stores, which in 2014 announced that it will begin allowing customers to trade in used video games for store credit at most of its stores. Best Buy and Target also buy used video games from customers.

Mergers and Acquisitions

In July 2015, the company made good on its stated plan to move into collectibles when it outbid teen apparel retailer Hot Topic to acquire  Geeknet, a purveyor of geek and gamer-targeted gifts, apparel, and collectibles like a Hans Solo refrigerator, Star Trek aprons, and Dr. Who cookie cutters.

During 2014, the company spent $93.3 million on acquiring AT&T resellers and authorized Apple retailers to continue growing its Technology Brands business.

In late 2013 the company acquired the 50.1% of Simply Mac that it didn't already own, boosting its Technology Brands segment. The $9.5 million deal added Apple specialty retail stores in Utah and Wyoming. Also that year, GameStop bought Spring Communications for $62.6 million.

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Gamestop Corp.

625 Westport Pkwy
Grapevine, TX 76051-6740
Phone: 1 (817) 424-2000
www.gamestop.com

Stats

  • Employer Type: Public
  • Stock Symbol: GME
  • Stock Exchange: NYSE
  • CEO: J. Paul Raines
  • Chairman: Daniel A. DeMatteo
  • CEO: J. Paul Raines

Major Office Locations

  • Grapevine, TX

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