GameStop 2003 Annual Report Download - page 2

Madden฀NFL฀2004฀-฀PlayStation฀2
Dear฀Shareholders,
2003฀was฀another฀successful฀year฀for฀GameStop.฀฀We฀were฀profitable฀every฀quarter,฀gained฀market฀share฀every฀quarter,฀and฀have฀
positioned฀our฀company฀to฀better฀take฀advantage฀of฀the฀expanding฀opportunities฀presented฀by฀the฀GameStop฀business฀model.
฀฀
Last฀year,฀GameStop฀achieved฀record฀sales,฀record฀profits,฀and฀record฀earnings฀per฀share.฀฀We฀
finished฀the฀year฀with฀$1,578฀million฀in฀sales,฀an฀increase฀of฀$226฀million;฀our฀operating฀income฀
at฀$104฀million฀was฀$17฀million฀higher,฀and฀our฀operating฀margin฀increased฀to฀a฀record฀6.8%.฀฀In฀
addition,฀we฀generated฀$70฀million฀in฀operating฀cash฀flows,฀invested฀$63฀million฀in฀capital฀expen-
ditures฀and฀finished฀the฀year฀with฀no฀debt฀on฀our฀balance฀sheet.
฀
I฀am฀particularly฀happy฀with฀our฀6.8%฀operating฀margin.฀฀Even฀with฀a฀sizable฀investment฀in฀new฀
store฀growth฀and฀infrastructure,฀our฀operating฀margin฀is฀by฀far฀the฀best฀of฀any฀specialty฀store฀
competitor฀in฀our฀business,฀and฀is฀a฀reflection฀of฀the฀continued฀efforts฀to฀refine฀our฀operations฀for฀
improved฀efficiency.
฀
During฀2003,฀we฀opened฀300฀new฀stores฀compared฀with฀210฀in฀2003.฀In฀addition,฀we฀continued฀
to฀make฀significant฀investments฀in฀our฀infrastructure฀to฀insure฀that฀with฀accelerated฀growth฀we฀
will฀still฀remain฀responsive฀to฀our฀customers,฀while฀keeping฀our฀business฀in฀control฀and฀running฀efficiently.฀฀We฀are฀so฀confident฀in฀
the฀future฀growth฀of฀this฀business฀that฀we฀are฀forecasting฀that฀we฀will฀open฀between฀300฀and฀330฀stores฀in฀2004.
฀
In฀a฀year฀in฀which฀the฀economy฀was฀brittle฀and฀job฀creation฀was฀difficult฀at฀the฀macro฀level,฀GameStop฀created฀over฀2,000฀new฀
positions฀and฀employed฀over฀12,000฀“gamers”฀throughout฀the฀country.
฀
During฀the฀year,฀we฀have฀virtually฀completed฀the฀national฀rebranding฀of฀our฀stores฀under฀the฀GameStop฀name,฀enhancing฀our฀abil-
ity฀to฀more฀actively฀and฀efficiently฀market฀ourselves฀to฀the฀growing฀and฀diverse฀customer฀base฀for฀video฀game฀products.
฀
Both฀of฀our฀two฀non-retail฀divisions,฀GameStop.com฀and฀ Game฀Informer ฀Magazine,฀had฀outstanding฀years.฀Both฀are฀rapidly฀grow-
ing,฀both฀are฀profitable฀and฀have฀exciting฀futures.
GameStop.com฀has฀continued฀to฀aggressively฀improve฀our฀online฀offers,฀and฀late฀last฀year฀began฀a฀partnership฀with฀Amazon.com฀
to฀be฀their฀exclusive฀video฀game฀specialist.฀As฀we฀add฀additional฀features฀on฀their฀site,฀we฀expect฀even฀more฀robust฀growth฀during฀
the฀coming฀year.
฀฀
Game฀Informer ฀has฀been฀the฀fastest฀growing฀consumer฀magazine฀for฀the฀past฀two฀years,฀and฀is฀the฀56th฀largest฀circulation฀con-
sumer฀magazine฀in฀the฀country.฀ Game฀Informer’s ฀growth฀has฀been฀nothing฀less฀than฀phenomenal.
฀
We฀firmly฀believe฀that฀the฀video฀game฀business฀will฀continue฀to฀attract฀an฀ever-widening฀customer฀base฀as฀the฀creativity฀of฀the฀
software฀writers,฀combined฀with฀improving฀technology,฀will฀deliver฀a฀superior฀entertainment฀experience.
฀
Our฀goal฀is฀not฀only฀to฀keep฀up฀with฀the฀changes฀in฀the฀business,฀but฀to฀move฀ahead฀of฀the฀demand฀and฀create฀new฀business฀from฀
new฀users.฀Our฀successful฀new฀store฀growth฀is฀proof฀that฀there฀are฀many฀untapped฀markets฀for฀GameStop,฀and฀we฀are฀better฀at฀
identifying฀locations฀and฀negotiating฀favorable฀leases.
฀
We฀are฀proud฀of฀our฀accomplishments,฀confident฀in฀our฀future฀and฀excited฀about฀the฀many฀
opportunities฀for฀all฀our฀associates฀who฀have฀helped฀GameStop฀grow฀to฀become฀a฀nationally฀
recognized฀brand฀in฀the฀video฀entertainment฀field.
Now฀let฀me฀move฀to฀address฀the฀three฀questions฀that฀most฀frequently฀are฀part฀of฀our฀discussions฀
with฀investors:
฀
1.฀฀Is฀this฀a฀good฀time฀to฀invest฀in฀GameStop?฀฀Where฀are฀we฀in฀the฀product฀“cycle”?
Yes,฀I฀believe฀this฀is฀a฀great฀time฀to฀invest฀in฀our฀company.฀Not฀only฀are฀we฀a฀solid฀performer,฀
well฀positioned฀in฀the฀competitive฀marketplace,฀but฀our฀unique฀business฀model฀of฀new฀and฀used฀
Letter to the Shareholders