GameStop 2012 Annual Report Download - page 53

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comparable store sales was primarily due to decreases in new video game hardware sales, new video game
software sales and pre-owned video game products sales offset partially by an increase in other product sales.
Refer to the note to the Selected Financial Data table in Item 6, Selected Financial Data, for a discussion of the
calculation of comparable store sales.
New video game hardware sales decreased $278.2 million, or 17.3%, from fiscal 2011 to fiscal 2012,
primarily due to a decrease in hardware unit sell-through related to being in the late stages of the current console
cycle and sales from the launch of the Nintendo 3DS in the first quarter of fiscal 2011, which exceeded the sales
from the launch of the Sony PlayStation Vita in the first quarter of fiscal 2012. These sales declines were offset
partially by the launch of the Nintendo Wii U in the fourth quarter of fiscal 2012 and sales for the 53rd week in
fiscal 2012. New video game software sales decreased $465.8 million, or 11.5%, from fiscal 2011 to fiscal 2012,
primarily due to a lack of new release video game titles in fiscal 2012 when compared to fiscal 2011 and declines
in sales due to the late stages of the console cycle, offset partially by sales for the 53rd week in fiscal 2012. Pre-
owned video game products sales decreased $189.7 million, or 7.2%, from fiscal 2011 to fiscal 2012, primarily
due to a decrease in store traffic related to the lack of new release video game titles in fiscal 2012 when
compared to fiscal 2011 and lower video game demand due to the late stages of the current console cycle, offset
partially by sales for the 53rd week in fiscal 2012. Sales of other product categories increased $269.9 million, or
21.2%, from fiscal 2011 to fiscal 2012. The increase in other product sales was primarily due to an increase in
sales of PC entertainment software and mobile devices in fiscal 2012 when compared to fiscal 2011 and sales for
the 53rd week in fiscal 2012.
As a percentage of net sales, new video game hardware sales and new video game software sales decreased
and other product sales increased in fiscal 2012 compared to fiscal 2011. The change in the mix of net sales was
primarily due to the increase in other product sales as a result of the expansion of the mobile sales category and
growth in the PC entertainment software category due to new releases. These categories showed significant
growth in fiscal 2012 while sales of new video game hardware and new video game software decreased due to
fewer new software title launches compared to the same period last year and lower sales due to the late stages of
the current console cycle. Cost of sales decreased by $635.8 million, or 9.3%, from $6,871.0 million in fiscal
2011 to $6,235.2 million in fiscal 2012 primarily as a result of the decrease in net sales, offset partially by cost of
sales related to sales for the 53rd week in fiscal 2012 and the changes in gross profit discussed below.
Gross profit decreased by $28.0 million, or 1.0%, from $2,679.5 million in fiscal 2011 to $2,651.5 million in
fiscal 2012. Gross profit as a percentage of net sales was 28.1% in fiscal 2011 and 29.8% in fiscal 2012. The
gross profit percentage increase was primarily due to the increase in sales of other products as a percentage of
total net sales and the increase in gross profit as a percentage of sales on new video game hardware and software
sales and pre-owned video game products sales. Gross profit as a percentage of sales on new video game
hardware increased slightly from 7.0% in fiscal 2011 to 7.6% in fiscal 2012. Gross profit as a percentage of sales
on new video game software increased from 20.7% for fiscal 2011 to 21.9% for fiscal 2012. Gross profit as a
percentage of sales on pre-owned video game products increased from 46.6% in fiscal 2011 to 48.1% in fiscal
2012 due to a decrease in promotional activities and improvements in margin rates throughout most of our
international operations when compared to the prior year. Gross profit as a percentage of sales on the other
product sales category decreased from 39.8% in fiscal 2011 to 38.5% in fiscal 2012 primarily due to an increase
in the mix of PC entertainment software sales and mobile sales to total other product sales. New PC
entertainment software and mobile products have a lower gross profit percentage than total other product sales.
Selling, general and administrative expenses decreased by $6.2 million, or 0.3%, from $1,842.1 million in
fiscal 2011 to $1,835.9 million in fiscal 2012. This decrease was primarily due to changes in foreign exchange rates
which had the effect of decreasing expenses by $26.7 million when compared to fiscal 2011 offset partially by
expenses for the 53rd week in fiscal 2012. Selling, general and administrative expenses as a percentage of sales
increased from 19.3% in the fiscal 2011 to 20.7% in fiscal 2012. The increase in selling, general and administrative
expenses as a percentage of net sales was primarily due to deleveraging of fixed costs as a result of the decrease in
comparable store sales. Included in selling, general and administrative expenses are $19.6 million and $18.8 million
in stock-based compensation expense for fiscal 2012 and fiscal 2011, respectively.
38