GameStop 2014 Annual Report Download - page 27

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which gives our customers access to exclusive video game related rewards. The programs' paid memberships may also include a
subscription to Game Informer magazine, additional discounts on pre-owned merchandise in our stores and additional credit on
trade-ins of pre-owned products. As of January 31, 2015, we had over 30 million members in our U.S. PowerUp Rewards program,
approximately 7million of which were paid members. In total, our loyalty programs around the world had approximately 41 million
members. Our branding strategy is further supported by our websites which allow our customers to buy games online, reserve or
pick up merchandise in our stores, order in-store for home delivery and to learn about the latest video game products and their
availability in our stores. Together,our loyalty programs, websites, mobile applications, magazine and other properties are apart
of our multi-channelretail strategy designed to enhance our relationships with our customers, make it easier for our customers to
transact with us and increase brand loyalty.Infiscal 2015, we plan to continue to aggressively promote our loyalty programs and
increase brand awareness over abroader demographic area in order to promote our unique buying experience in-store for new and
pre-owned hardware and software, trade-ins of pre-owned video game and mobile consumer electronics products and to leverage
our websites.
Expand our Digital Growth Strategy
We expect that future growth in the electronic game industry will be driven by the sale of video games delivered in digital
form and the expansion of other forms of gaming. The proliferation of online game play through Microsoft Xbox Live, the
PlayStation Network and PC gaming websites has led to consumer demand for subscription, time and points cards (“digital
currency”) as well as DLC, for existing console video games. To respond to this demand, we currently sell various types of products
that relate to the digital category,including Xbox Live, PlayStation Plus and Nintendo network points cards, as well as prepaid
digital and online timecards and DLC. We believeweare the only significant brick-and-mortar retail seller of DLC and that we
are frequently the leading seller of DLC for most major game titles.
Additionally,weoperate Kongregate, which is aleading platform for web and mobile gaming that has attracted over 3.3
billion web gameplays and over 600 million mobile gameplays since its launch. Kongregate is also apublisher of mobile games
and has several titles available in both the Apple and Google app stores, which have received over 36 million mobile installs.
While all Kongregate games are free to play,the website features aproprietary virtual currency called "Kreds" that can be used
to unlock upgrades and features, and mobile games may also include items available for purchase. We intend to continue investing
in the expansion of Kongregate's mobile game publishing platform through the development of new games designed to appeal to
core gamers across the Kongregate and GameStop networks.
We will continue to make strategic investments in multichannel, digital delivery systems, mobile applications and in-store
and website functionality to enable our customers to access digital content and eliminate friction in the digital sales and delivery
process. We also plan to continue to grow ourdigital sales base through our in-store offerings as well as through our online and
mobile gaming platforms.
Disciplined Capital Allocation
Our objective is to return asignificant portion of our free cash flow to our shareholders through share repurchases and dividends
unless more strategic opportunities arise that we believe would create more meaningful shareholder returns. In an effort to continue
our commitment to drive long-term shareholder value we have accomplished the following in fiscal 2014 and thus far in fiscal
2015:
•Quarterly Cash Dividend. In fiscal 2014, we paid dividends of $1.32 per share of Class ACommonStock, totaling
approximately $148.8 million for the year.Additionally, on March3,2015, ourBoard of Directors authorized an increase
in our annual cash dividend from $1.32 to $1.44 per share of Class ACommonStock, which represents an increase of 9%.
On March 3, 2015, we declared our first quarterly dividend of fiscal 2015 of $0.36 per share of Class ACommon Stock,
payable on March 24, 2015 to stockholders of record on March 17,2015.
•ShareRepurchase Program. In fiscal 2014, we repurchased 8.4 million shares of our Class ACommonStock at an average
price per share of $39.50 for atotal of $333.4 million. On November 11,2014, ourBoard of Directors authorized $500.0
million of funds to be used to repurchase shares of our Class ACommonStock, replacing the $176.4 million remaining
under our previous authorization.
•Strategic Capital Opportunities. In order to create more meaningful shareholder returns, as we evaluate investments in
strategicopportunities, we target internal rates of return (“IRR”) in excess of 20% for whitespace store expansion and
acquisitions. For fiscal 2014, the collective target IRR of the stores we opened and the AT &T and Apple resellers we
acquired was 24%.
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