GameStop 2010 Annual Report Download - page 54

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Table of Contents
The increase in sales was primarily attributable to the favorable impact of changes in exchange rates in fiscal 2010 when compared to fiscal 2009,
which had the effect of increasing sales by $38.8 million. Excluding the impact of changes in exchange rates, sales in the Canadian segment
decreased 5.7%. The decrease in sales was primarily due to the decrease in sales at existing stores, offset by the additional sales at the 26 stores
opened since January 31, 2009. As of January 29, 2011, the Canadian segment had 345 stores compared to 337 stores as of January 30, 2010. The
decrease in sales at existing stores was primarily due to weak consumer traffic and a slow-down in hardware unit sell-through and lower price points
when compared to fiscal 2009. Segment operating income for fiscal 2010 decreased $12.4 million to $22.6 million compared to $35.0 million for
fiscal 2009. The decrease in operating income when compared to the prior year was primarily due to the decrease in sales at existing stores and the
increase in selling, general and administrative expenses associated with the increase in the number of stores in operation. The decrease in operating
income was partially offset by the favorable impact of changes in exchange rates which had the effect of increasing operating earnings by
$1.6 million when compared to fiscal 2009.
Australia
Segment results for Australia include retail operations and e-commerce sites in Australia and New Zealand. As of January 29, 2011, the
Australian segment included 405 stores, compared to 388 stores as of January 30, 2010. Sales for the 52 weeks ended January 29, 2011 increased
6.6% compared to the 52 weeks ended January 30, 2010. The increase in sales was primarily attributable to the favorable impact of changes in
exchange rates in fiscal 2010 when compared to fiscal 2009, which had the effect of increasing sales by $63.8 million. Excluding the impact of
changes in exchange rates, sales in the Australian segment decreased 5.4%. The decrease in sales was primarily due to the decrease in sales at
existing stores offset by the additional sales at the 59 stores opened since January 31, 2009. The decrease in sales at existing stores was primarily due
to weak consumer traffic and a slow-down in hardware unit sell-through and lower price points when compared to fiscal 2009. Segment operating
income in fiscal 2010 decreased by $5.0 million to $41.0 million when compared to $46.0 million in fiscal 2009. The decrease in operating earnings
for fiscal 2010 was due to the decrease in sales at existing stores and the increase in selling, general and administrative expenses associated with the
increase in the number of stores in operation. Selling, general and administrative expenses will rise as a percentage of sales during periods of store
count growth due to the fixed nature of many store expenses compared to the immature sales at new stores. This decrease in operating earnings was
offset by the favorable impact of changes in exchange rates which had the effect of increasing operating earnings by $3.8 million when compared to
fiscal 2009.
Europe
Segment results for Europe include retail operations in 13 European countries and e-commerce operations in five countries. As of January 29,
2011, the European segment operated 1,384 stores, compared to 1,296 stores as of January 30, 2010. For the 52 weeks ended January 29, 2011,
European sales decreased 3.2% compared to the 52 weeks ended January 30, 2010. This decrease in sales was due to the unfavorable impact of
changes in exchange rates in fiscal 2010, which had the effect of decreasing sales by $106.4 million when compared to fiscal 2009, and a decrease in
sales at existing stores. The decrease in sales was partially offset by additional sales at the 228 new stores opened since January 31, 2009. The
decrease in sales at existing stores was primarily driven by weak consumer traffic due to the continued macroeconomic weakness and lower
hardware sales as a result of a slow-down in hardware unit sell-through and lower price points when compared to fiscal 2009.
The segment operating income in Europe for fiscal 2010 increased by $1.0 million to $68.2 million compared to $67.2 million in fiscal 2009.
The increase in the operating income was primarily due to an increase in gross margin, driven by an increase in used product sales, partially offset
by the unfavorable impact of changes in exchange rates, which had the effect of decreasing operating earnings by $6.5 million when compared to
fiscal 2009. 38