GameStop 2008 Annual Report Download - page 21

Providing a First-to-Market Distribution Network. We employ a variety of rapid-response distribution
methods in our efforts to be the first-to-market for new video game products and PC entertainment software. We
strive to deliver popular new releases to selected stores within hours of release and to all of our stores by the next
morning. This highly efficient distribution network is essential, as a significant portion of a new title’s sales will be
generated in the first few days and weeks following its release. As the world’s largest retailer of video game products
and PC entertainment software with a proven capability to distribute new releases to our customers quickly, we
believe that we regularly receive a large allocation of popular new video game products and PC entertainment
software. On a daily basis, we actively monitor sales trends, customer reservations and store manager feedback to
ensure a high in-stock position for each store. To assist our customers in obtaining immediate access to new releases,
we offer our customers the opportunity to pre-order products in our stores or through our website 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 state-of-the-art distribution
facilities. These systems enable us to maximize the efficiency of the flow of over 4,500 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
Open New Stores. We intend to continue to open new stores in our targeted markets. We opened 674 new
stores in fiscal 2008 and acquired 328 stores in France, a new market for us. We opened 586 new stores in the
52 weeks ended February 2, 2008 (“fiscal 2007”). We plan to open approximately 400 new stores in the 52 weeks
ending January 30, 2010 (“fiscal 2009”). Our primary growth vehicles will be the expansion of our strip center store
base in the United States and the expansion of our international store base. Our strategy within the U.S. is to open
strip center stores in targeted major metropolitan markets and in regional shopping centers in other markets. Our
international strategy is to continue our expansion in Europe and the opening of new stores in advantageous markets
and locations in Canada and Australia. 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, but our goal is to minimize the impact.
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 brand.
•Capitalize on Growth in Demand. Our sales of new video game hardware, new video game software and
used video game products grew by approximately 55%, 39% and 21%, respectively, in fiscal 2007 primarily
due to new store growth and the increase in comparable store sales, and by 11%, 32% and 28%, respectively,
in fiscal 2008, due primarily to new store growth, the acquisition of Micromania and the increase in
comparable store sales. In fiscal 2007, our comparable store sales increased 24.7%, driven in large measure
by the popularity of the Nintendo Wii following its worldwide launch in November 2006, the launch of the
Sony PlayStation 3 in Australia and Europe in March 2007 and the release of several strong software titles in
the fall of 2007, including Halo 3 by Microsoft, Guitar Hero III and Call of Duty 4 by Activision, Inc.
(“Activision”) and Rock Band by Electronic Arts, Inc. (“Electronic Arts”). Our comparable store sales
increased 12.3% in fiscal 2008 due to the continued demand for the Nintendo Wii and strong sales of video
game software titles, including Mario Kart and Wii Fit by Nintendo, Grand Theft Auto IV by Take Two
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