GameStop 2009 Annual Report Download - page 8

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summer, Chris was the Vice President of
Digital Media at Playboy Enterprises and has
more than a decade of senior management
experience developing and executing online
and mobile initiatives.
With the addition of Rob, Mike, Shawn and
Chris to our leadership team, I am very
confident in our ability to continue driving
growth in our business. We’ve put together
a strong plan for 2010 including our capital
allocation strategy, our business model and
our real estate plan, which I will expand on
below. Additionally, I’d also like to share our
thoughts on new title releases and guidance
for 2010.
CAPITAL ALLOCATION
At the first of the year, we announced our
capital allocation strategy. Driven by the
strong cash flow we’ve generated and expect
to continue generating, our senior leaders
and board felt January was the right time to
share our vision for the company’s excess
cash. The plan provides ample investment
capital to continue our global store growth,
as well as enhance shareholder returns
through a $300 million share repurchase
program. As of today, we have completed
$247 million of the authorized share
repurchases.
Since 2006, GameStop’s cash flow has
funded the opening of approximately 2,000
new stores, redeemed $500 million in
long-term debt and funded the Micromania
acquisition for $580 million. We project our
cash flow will remain at or above existing
levels for 2010. For this year, we estimate
having $600 million in cash from operations.
We see that being funneled into four major
categories:
Our equity presents a very attractive
investment opportunity for shareholders,
and I believe our capital allocation plan
underscores the financial strength and long-
term confidence in GameStop.
BRICK AND MORTAR ASSETS
Our stores are the foundation from which
everything else evolves. In 2009, we opened
approximately 400 new stores worldwide,
and we plan to mirror that number in 2010.
Our real estate strategy focuses on quality
locations with flexible lease terms that help
us gain market share. In addition, our real
estate gurus are experts at saving money
when they negotiate lease renewals.
To provide more color, the after-tax return on
investment in the first year for a new store
is 45 percent. By year three, it’s up to 95
percent. That’s a return most would envy. In
addition to flexible lease terms, our footprint
requires minimal capital for initial build-
outs. With 6,400 stores globally, we are the
neighborhood video game store.