GameStop 2005 Annual Report Download - page 26

A change in the mix of our business from year to year and from country to country, changes in rules related to
accounting for income taxes, changes in tax laws in any of the multiple jurisdictions in which we operate or adverse
outcomes from the tax audits that regularly are in process in any jurisdiction in which we operate could result in an
unfavorable change in our overall tax rate, which could have a material effect on our business and results of our
operations.
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 may not be
able to enter into new leases on favorable terms or at all, or we may not be able to locate suitable alternative sites or
additional sites for new store expansion in a timely manner. Our revenues and earnings may decline if we fail to
maintain existing store locations, enter into new leases, locate alternative sites or find additional sites for new store
expansion.
The ability to download video games and play video games on the Internet could lower our sales.
While it is currently only possible to download current release video game software onto existing video game
platforms over the Internet on a limited basis, at some point in the future this technology may become more
prevalent. A limited selection of PC entertainment software and older generation video games may currently be
purchased for download over the Internet, and as technology advances, a broader selection of games may become
available for purchase and download or playing on the Internet. If advances in technology continue to expand our
customers’ ability to access software through these and other sources, our customers may no longer choose to
purchase video games or PC entertainment software in our stores. As a result, our sales and earnings could decline.
If we fail to keep pace with changing industry technology, we will be at a competitive disadvantage.
The interactive entertainment industry is characterized by swiftly changing technology, evolving industry
standards, frequent new and enhanced product introductions and product obsolescence. These characteristics
require us to respond quickly to technological changes and to understand their impact on our customers’
preferences. If we fail to keep pace with these changes, our business may suffer.
An adverse trend in sales during the holiday selling season could impact our financial results.
Our business, like that of many retailers, is seasonal, with the major portion of our sales and operating profit
realized during the fourth fiscal quarter, which includes the holiday selling season. During fiscal 2005, on a pro
forma basis, we generated approximately 38% of our sales and approximately 75% of our operating earnings during
the fourth quarter. Any adverse trend in sales during the holiday selling season could lower our results of operations
for the fourth quarter and the entire year.
Our results of operations may fluctuate from quarter to quarter, which could affect our business,
financial condition and results of operations.
Our results of operations may fluctuate from quarter to quarter depending upon several factors, some of which
are beyond our control. These factors include:
• the timing of new product releases;
• the timing of new store openings; and
• shifts in the timing of certain promotions.
These and other factors could affect our business, financial condition and results of operations, and this makes
the prediction of our financial results on a quarterly basis difficult. Also, it is possible that our quarterly financial
results may be below the expectations of public market analysts.
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