GameStop 2004 Annual Report Download - page 17

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 headquar-
ters 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 300 new stores in Ñscal 2003 and 338 new stores in
Ñscal 2004. We plan on opening approximately 370 to 400 new stores in Ñscal 2005. Our primary growth
vehicle will be the expansion of our strip center store base, which we believe could grow to over 3,000 stores in
the United States. Our strategy is to open strip center stores in targeted major metropolitan markets and in
regional shopping centers in tertiary markets. 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.
In addition, we began to expand in Europe in June 2003 by acquiring a majority interest in Gamesworld
Group Limited (""Gamesworld''), an Ireland-based video game retailer with 10 stores throughout Ireland.
Since our acquisition of Gamesworld, we have opened an additional 15 stores, including three in Northern
Ireland. We plan to continue to expand in Europe.
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 new and used video game software grew by
approximately 26% in Ñscal 2003 and by an additional 22% in Ñscal 2004. In Ñscal 2003 and Ñscal 2004,
our comparable store sales increased 0.8% and 1.7%, respectively, driven in large measure by the
success of Sony PlayStation 2, Microsoft Xbox, Nintendo GameCube and Nintendo DS, which was
launched in November 2004. Comparable store sales increased a modest 1.7% in Ñscal 2004, as
declining video game hardware price points and hardware shortages oÅset the increase in video game
software sales, which was fueled by the success of Grand Theft Auto: San Andreas, from Take-Two
Interactive Software, Inc. and Halo 2 from Microsoft Corp. During Ñscal 2003 and Ñscal 2004, we
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, the release in
March 2005 of the Sony PSP, the anticipated release in late 2005 of the Microsoft Xbox 2, the
anticipated release in 2006 of the Sony PlayStation 3 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 beneÑts 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, 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 beneÑts of
shopping in our stores. In connection with our brand-building eÅorts, in each of the last three Ñscal
years, we increased the amount of media advertising in targeted markets. In Ñscal 2005, we plan to
continue to increase media advertising, to expand our GameStop loyalty card program, to aggressively
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