GameStop 2003 Annual Report Download - page 20

Table of Contents
monitor sales trends, customer reservations and store manager feedback to ensure a high in-stock position for each store. To assure our customers immediate access to
new releases, we offer our customers the opportunity to pre-order products in our stores or through our web site prior to their release.
Investing in our Information Systems and Distribution Capabilities.We employ sophisticated and fully-integrated inventory management, store-level point of sale
and financial systems and a centralized state-of-the-art distribution facility. These systems enable us to maximize the efficiency of the flow of over 5,000 SKUs,
improve store efficiency, optimize store in-stock positions and carry a broad selection of inventory. Our proprietary inventory management system enables us to
maximize sales of new release titles and avoid markdowns as titles mature and utilizes electronic point-of-sale equipment that provides corporate headquarters with
daily information regarding store-level sales and available inventory levels to automatically generate replenishment shipments to each store at least twice a week. In
addition, our highly-customized inventory management system allows us to actively manage the pricing and product availability of our used video game products across
our store base and to reallocate our inventory as necessary. Our systems enable each store to carry a merchandise assortment uniquely tailored to its own sales mix and
customer needs. Our ability to react quickly to consumer purchasing trends has resulted in a target mix of inventory, reduced shipping and handling costs for overstocks
and reduced our need to discount products.
Growth Strategy
New Store Expansion.We intend to continue to open new strip center stores in our targeted markets and new mall stores in selected mall locations. We opened 210
new stores in fiscal 2002 and 300 new stores in fiscal 2003. We plan on opening approximately 300 to 330 new stores in fiscal 2004. Our primary growth vehicle will
be the expansion of our strip center store base, which we believe could grow to over 2,000 stores in the United States. Our strategy is to open clusters of strip center
stores in targeted major metropolitan markets. For example, we opened 38 new stores in the Dallas/ Fort Worth metropolitan area in the last three years and now operate
a total of 67 stores in the Dallas/ Fort Worth area. We analyze each market relative to target population and other demographic indices, real estate availability,
competitive factors and past operating history, if available. In some cases, these new stores may adversely impact sales at existing stores.
Increase Comparable Store Sales.We plan to increase our comparable store sales by capitalizing on the growth in the video game industry, expanding our sales of
used video game products and increasing awareness of the GameStop name.
• Capitalize on Growth in Demand.Our sales of video game software grew by approximately 41% in fiscal 2002 and by an additional 26% in fiscal 2003. In fiscal
2002 and fiscal 2003, our comparable store sales increased 11.4% and 0.8%, respectively, driven in large measure by the success of Sony PlayStation 2, which
was launched in October 2000, Microsoft Xbox and Nintendo GameCube, which were both launched in November 2001 and Nintendo Game Boy Advance SP,
which was launched in March 2003. Comparable store sales increased a modest 0.8% in fiscal 2003, as declining video game hardware price points offset a
significant increase in video game software sales. During fiscal 2002 and fiscal 2003, we successfully capitalized on the growth in demand for video game
software and accessories that followed the increases in the installed hardware base of these four video game platforms. Over the next few years, we expect to
continue to capitalize on the increasing installed base for these platforms and the related growth in video game software and accessories sales.
• Increase Sales of Used Video Game Products.We will continue to expand the selection and availability of used video game products in both our mall and strip
center stores. Our strategy consists of increasing consumer awareness of the benefits of trading in and buying used video game products at our stores through
increased marketing activities. We expect the continued growth of new platform technology to drive trade-ins of previous generation products, including
Nintendo Game Boy Color, Nintendo 64 and Sony PlayStation, as well as next generation platforms, thereby expanding the supply of used video game products.
• Increase GameStop Brand Awareness.We intend to increase customer awareness of the benefits of shopping in our stores. In connection with our brand-building
efforts, in fiscal 2003, we increased the
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