GameStop 2011 Annual Report Download - page 37

• the ability to hire and train skilled associates;
• the ability to integrate new stores into our existing operations; and
• the ability to increase sales at new store locations.
Our growth will also depend on our ability to process increased merchandise volume resulting from new
store openings through our inventory management systems and distribution facilities in a timely manner. If we
fail to manage new store openings in a timely and cost efficient manner, our growth or profits may decrease.
Failure to execute our strategy to close stores and transfer customers and sales to nearby stores could
adversely impact our financial results.
Our strategy includes closing stores which are not meeting our performance standards or stores at the end of
their lease terms and transferring sales to other nearby GameStop locations. We believe that we can ultimately
increase profitability by successfully transferring customers and sales to other stores by marketing directly to the
PowerUp Rewards members who have shopped in the stores that we plan to close. If we are unsuccessful in
marketing to customers of the stores that we plan to close or in transferring sales to nearby stores, our sales and
profitability could be adversely affected.
If our management information systems fail to perform or are inadequate, our ability to manage our
business could be disrupted.
We rely on computerized inventory and management systems to coordinate and manage the activities in our
distribution centers, as well as to communicate distribution information to the off-site, third-party operated
distribution centers with which we work. The third-party distribution centers pick up products from our suppliers,
repackage the products for each of our stores and ship those products to our stores by package carriers. We use
inventory replenishment systems to track sales and inventory. Our ability to rapidly process incoming shipments
of new release titles and deliver them to all of our stores, either that day or by the next morning, enables us to
meet peak demand and replenish stores at least twice a week, to keep our stores in stock at optimum levels and to
move inventory efficiently. If our inventory or management information systems fail to adequately perform these
functions, our business could be adversely affected. In addition, if operations in any of our distribution centers
were to shut down or be disrupted for a prolonged period of time or if these centers were unable to accommodate
the continued store growth in a particular region, our business could suffer.
We have made and may make investments and acquisitions which could negatively impact our business if
we fail to successfully complete and integrate them, or if they fail to perform in accordance with our
expectations.
To enhance our efforts to grow and compete, we have made and continue to make investments and
acquisitions. These activities include investments in and acquisitions of digital, browser, social and mobile
gaming and technology-based companies as the delivery methods for video games continue to evolve. Our plans
to pursue future transactions are subject to our ability to identify potential candidates and negotiate favorable
terms for these transactions. Accordingly, we cannot assure you that future investments or acquisitions will be
completed. In addition, to facilitate future transactions, we may take actions that could dilute the equity interests
of our stockholders, increase our debt or cause us to assume contingent liabilities, all of which may have a
detrimental effect on the price of our common stock. Also, companies that we have acquired, and that we acquire
in the future, have products that are in development, and there is no assurance that these products will be
successfully developed. Finally, if any acquisitions are not successfully integrated with our business, or fail to
perform in accordance with our expectations, our ongoing operations could be adversely affected. Integration of
digital, browser, social and mobile gaming and technology-based companies may be particularly challenging to
us as these companies are outside of our historical operating expertise.
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