GameStop 2003 Annual Report Download - page 13

Table of Contents
freight charges and payment terms. We purchase substantially all of our products directly from manufacturers, software publishers and approximately five distributors.
Our largest vendors are Nintendo of America, Inc., Electronic Arts, Inc. and Sony Computer Entertainment of America, Inc., which accounted for 14%, 14% and 12%,
respectively, of our new product purchases in fiscal 2003 (the 52-week period ended January 31, 2004). If our suppliers do not provide us with favorable business terms,
we may not be able to offer products to our customers at competitive prices.
The video game system and software product industries are cyclical, which could cause significant fluctuation in our earnings.
The electronic game industry has been cyclical in nature in response to the introduction and maturation of new technology. Following the introduction of new video
game platforms, sales of these platforms and related software and accessories generally increase due to initial demand, while sales of older platforms and related
products generally decrease as customers migrate toward the new platforms. New video game platforms have historically been introduced approximately every five
years. If video game platform manufacturers fail to develop new hardware platforms, our sales of video game products could decline.
An adverse trend in sales during the holiday selling season could impact our financial results.
Our business, like that of many specialty retailers, is seasonal, with the major portion of our sales and operating profit realized during the fourth fiscal quarter,
which includes the holiday selling season. During fiscal 2003, we generated approximately 40% of our sales and approximately 62% of our operating earnings during
the fourth quarter. Any adverse trend in sales during the holiday selling season could lower our results of operations for the fourth quarter and the entire year.
Our results of operations may fluctuate from quarter to quarter, which could result in a lower price for our Class A common stock.
Our results of operations may fluctuate from quarter to quarter depending upon several factors, some of which are beyond our control. These factors include:
• the timing of new product releases;
• the timing of new store openings; and
• shifts in the timing of certain promotions.
These and other factors could affect our business, financial condition and results of operations, and this makes the prediction of our financial results on a quarterly
basis difficult. Also, it is possible that our quarterly financial results may be below the expectations of public market analysts and investors.
Our failure to effectively manage new store openings could lower our sales and profitability.
Our growth strategy is largely dependent upon opening new stores and operating them profitably. We opened 300 stores in fiscal 2003 and expect to open
approximately 300 to 330 new stores in fiscal 2004. Our ability to open new stores and operate them profitably depends upon a number of factors, some of which may
be beyond our control. These factors include:
• the ability to identify new store locations, negotiate suitable leases and build out the stores in a timely and cost efficient manner;
• the ability to hire and train skilled associates;
• the ability to integrate new stores into our existing operations; and
• the ability to increase sales at new store locations.
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