GameStop 2003 Annual Report Download - page 14

Table of Contents
Our growth will also depend on our ability to process increased merchandise volume resulting from new store openings through our inventory management
systems and distribution facility in a timely manner. If we fail to manage new store openings in a timely and cost efficient manner, our growth may decrease.
If our management information systems fail to perform or are inadequate, our ability to manage our business could be disrupted.
We rely on computerized inventory and management systems to coordinate and manage the activities in our distribution center in Grapevine, Texas, as well as to
communicate distribution information to the off-site third-party operated distribution centers with which we work. The third-party distribution centers pick up products
from our suppliers, repackage the products for each of our stores and ship those products to our stores by package carriers. We use an inventory replenishment system to
track sales and inventory. Our ability to rapidly process incoming shipments of new release titles and deliver them to all of our stores, either that day or by the next
morning, enables us to meet peak demand and replenish stores at least twice a week, to keep our stores in stock at optimum levels and to move inventory efficiently. If
our inventory or management information systems fail to adequately perform these functions, our business could be adversely affected.
Our failure to successfully and efficiently transfer our headquarters and distribution center to our new facility could lower our sales and profitability.
In March 2004, we purchased a new 420,000 square foot headquarters and distribution center in Grapevine, Texas. We intend to transfer our headquarters and
distribution center operations to this facility by early 2005. If these transfers are not implemented efficiently, our sales and profitability may be adversely affected.
Pressure from our competitors may force us to reduce our prices or increase spending, which could decrease our profitability.
The electronic game industry is intensely competitive and subject to rapid changes in consumer preferences and frequent new product introductions. We compete
with mass merchants and regional chains, including Wal-Mart Stores, Inc., Target Corporation and Kmart Corporation; other video game and PC software specialty
stores located in malls and other locations, including Electronics Boutique Holdings Corp.; toy retail chains, including Toys “R” Us, Inc. and KB Holdings, L.L.C.
(“KB Toys”); mail-order businesses; catalogs; direct sales by software publishers; online retailers; and computer product and consumer electronics stores, including
Best Buy Co., Inc. and Circuit City Stores, Inc. In addition, video games are available for rental from many video stores, some of whom, like Hollywood Entertainment
Corp. and Blockbuster, Inc., have increased the availability of video game products for sale. Video game products may also be distributed through other methods which
may emerge in the future. We also compete with sellers of used video game products. Some of our competitors in the electronic game industry have longer operating
histories and may have greater financial resources than we do. Additionally, we compete with other forms of entertainment activities, including movies, television,
theater, sporting events and family entertainment centers. If we lose customers to our competitors, or if we reduce our prices or increase our spending to maintain our
customers, we may be less profitable.
International events could delay or prevent the delivery of products to our suppliers.
Our suppliers rely on foreign sources, primarily in Asia, to manufacture a significant portion of the products we purchase from them. As a result, any event causing
a disruption of imports, including the imposition of import restrictions or trade restrictions in the form of tariffs or quotas, could increase the cost and reduce the supply
of products available to us, which could lower our sales and profitability.
If we are unable to renew or enter into new leases on favorable terms, our revenue growth may decline.
All of our retail stores are located in leased premises. If the cost of leasing existing stores increases, we cannot assure you that we will be able to maintain our
existing store locations as leases expire. In addition, we
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