GameStop 2014 Annual Report Download - page 51

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the information contained in our consolidated financial statements,
including the notes thereto. Statements regardingfutureeconomic performance, management’s plans and objectives, and any
statements concerning assumptions related to the foregoing contained in Management’s Discussion and Analysis of Financial
Condition and Results of Operations constitute forward-looking statements. Certain factors, which may cause actual results to
vary materially from these forward-looking statements, accompany such statements or appear elsewhereinthisForm10-K,
including the factors disclosed under “Part I —Item 1A. Risk Factors.”
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Overview
We areaglobalfamily of specialty retail brands that makes the most popular technologies affordable and simple. As the
world's largest multichannel video game retailer,wesell new and pre-owned video game hardware, physical and digital video
game software, video game accessories, as well as new and pre-owned mobile and consumer electronics products and other
merchandise primarily through our GameStop, EB Games and Micromania stores. As of January 31, 2015, we operated 6,690
stores, in the United States, Australia, Canada and Europe, which are primarily located in major shopping malls and strip centers.
We also operate electronic commerce websites www.gamestop.com,www.ebgames.com.au,www.ebgames.co.nz,
www.gamestop.ca,www.gamestop.it,www.gamestop.ie,www.gamestop.de,www.gamestop.co.uk and www.micromania.fr. The
network also includes: www.kongregate.com ,our leading web and mobile gaming platform; Game Informer magazine, the world's
leading print and digital video game publication; and iOS and Android mobile applications. We also own and operate Spring
Mobile, an authorized AT&T reseller operating AT&T branded wireless retail stores and pre-paid wireless stores under the name
Cricket Wireless (an AT&T brand) in the United States, as well as acertified Apple reseller selling Apple consumer electronic
products in the United States under the name Simply Mac. We operate our business in four VideoGame Brands segments: United
States, Canada, Australia and Europe; and aTechnologyBrands segment, which includes the operations of our Spring Mobile
managed AT&T and Cricket Wireless branded stores and our Simply Macbusiness.
Our fiscal year is composed of the 52 or 53 weeks ending on the Saturday closest to the last day of January.Fiscal 2014
consisted of the 52 weeks ended on January 31, 2015 ("fiscal 2014"). Fiscal 2013 consisted of the 52 weeks ended on February 1,
2014 ("fiscal 2013"). Fiscal 2012 consisted of the 53 weeks ended on February 2, 2013 ("fiscal 2012").
Growth in the electronic game industry is generally driven by the introduction of new technology.Gaming consoles are
typically launched in cycles as technological developments provide significant improvements in graphics, audio quality,game
play,internet connectivity and other entertainment capabilities beyond video gaming. The current generation of consoles (the Sony
PlayStation 4, the Microsoft Xbox One and the Nintendo WiiU)was introduced between November 2012 and November 2013.
With the introduction of the new consoles in the fourth quarter of fiscal 2013, sales of new hardware have increased; however,
sales of the Sony PlayStation 4and the Microsoft Xbox One have negatively impacted our gross margin percentage in fiscal 2014.
We expect that future growth in the electronic game industry will also be driven by the sale of video games delivered in digital
form and the expansion of other forms of gaming. We currently sell various types of products that relate to the digital category,
including digitally downloadable content (“DLC”), full game downloads, Xbox LIVE, PlayStation Plus and Nintendo network
points cards, as well as prepaid digital and online timecards. We have made significant investments in e-commerce and in-store
and website functionality to enable our customers to access digital content easily and facilitate the digital sales and delivery process.
We plan to continue to invest in these types of processes and channels to grow our digital sales base and enhance our market
leadership position in the electronic game industry and in the digital aggregation and distribution category.
We continue to diversify our business by seeking out opportunities to extend our core competencies to other businesses and
retail categories to continue to grow and to help mitigate the financial impact from the cyclical nature of the video game console
cycle. In fiscal 2013, we completed our acquisitions of Simply Mac, an authorized Apple reseller currently operating in 60 stores,
and Spring Mobile, an authorized AT&T reseller currently operating in 361 AT &T branded stores and 63 Cricket Wireless branded
stores.Weintend to continue to expand the number of our Technology Brands stores in the near future. We sell and accept trades
of pre-owned mobile devices in most of our stores. In addition, we intend to continue to invest in customer loyalty programs
designed to attract and retain our customers.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. In preparing these financial statements, we have made our best estimates and judgments of
certain amounts included in the financial statements, giving due consideration to materiality.Changes in the estimates and
assumptions used by us could have asignificant impact on our financial results, and actual results could differ from those estimates.