GameStop 2014 Annual Report Download - page 40

Failure to effectively manage our new store openings could lower our sales and profitability.
Our growth strategy depends in part upon opening new stores and operating them profitably.Weopened49VideoGame
Brands stores and opened or acquired 284 Technology Brands stores in fiscal 2014. We expect to open or acquire approximately
400-600 new stores in fiscal 2015, including 50 VideoGame Brands stores and 350-550 Technology Brands stores. Our ability
to open new stores and operate them profitably depends upon anumberoffactors, some of which may be beyond our control.
These factors include:
•the ability to identify new store locations, negotiate suitable leases and build out the stores in atimely and cost efficient
manner;
•the ability to hireand train skilled associates;
•the ability to integrate new stores into our existing operations; and
•the ability to increase sales at new store locations.
If we fail to manage new store openings in atimely and cost efficient manner,our growth or profitsmay decrease.
Failure to successfully 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 closed approximately 300 VideoGame Brands stores worldwide
in fiscal 2014 and plan to close approximately 200-300 VideoGame Brands stores worldwide in fiscal 2015. 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.
We rely on centralized facilities for refurbishment of our pre-owned products. Any disruption to these facilities could
adversely affect our profitability.
We rely on centralized facilities for the refurbishment of all pre-owned products that we sell. If any disruption occurred at
these facilities, whether due to natural disaster or severe weather,oreventssuchasfire, accidents, power outages, systems failures,
or other unforeseen causes, sales of our pre-owned products could decrease. Since we generally obtain higher margins on our pre-
owned products, any adverse effect on their sales could adversely affect our profitability.
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 thoseproducts to our stores by package carriers. We useinventory 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 aweek, to keep our stores in stock at optimum
levels and to move inventory efficiently.Ifour 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 aprolonged period of time or if these centers were unable to accommodate the continued store growth in a
particular region, our business could suffer.
Data breaches involving customer or employee data stored by us could adversely affect our reputation and revenues.
We store confidential information with respect to our customers and employees. Acompromise of our data security systems
or those of businesses we interact with could result in information related to our customers or employees being obtained by
unauthorized persons. Any such breach of our systems could lead to fraudulent activity resulting in claims and lawsuits against
us or other operational problems or interruptions in connection with such breaches. Consequently,despite our efforts, our security
measureshavebeenbreached in the past and may be breached in the future due to cyber attack, team member error,malfeasance,
fraudulent inducement or other acts; and unauthorized parties have in the past obtained, and may in the future obtain, access to
our data or our customers’ data. While costs associated with past security breaches have not been significant, any breach or
unauthorized access in the future could result in significant legal and financial exposure and damage to our reputation that could
potentially have an adverse effect on our business. While we also seek to obtain assurances that others we interact with will protect
confidential information, there is arisk the confidentiality of data held or accessed by others may be compromised. If acompromise
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