GameStop 2004 Annual Report Download - page 12

ability to open new stores and operate them proÑtably 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 eÇcient 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.
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 eÇcient 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 oÅ-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 eÇciently. If our inventory or management
information systems fail to adequately perform these functions, our business could be adversely aÅected.
Our failure to successfully and eÇciently transfer our headquarters and distribution center to our new
facility could lower our sales and proÑtability.
In March 2004, we purchased a new 420,000 square foot headquarters and distribution center in
Grapevine, Texas. We relocated some of our distribution operations to this facility in Ñscal 2004. We intend to
transfer our headquarters and remaining distribution center operations to this facility in the second quarter of
Ñscal 2005. If this transfer is not implemented eÇciently, our sales and proÑtability may be adversely aÅected.
Pressure from our competitors may force us to reduce our prices or increase spending, which could
decrease our proÑtability.
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. and Target 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.; 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 Ñnancial 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 proÑtable.
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