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    GameStop Reports Second Quarter 2010 Results
    Video Game Software Sales Increase 5.3%
    National Roll-out of New Initiatives Underway

    GRAPEVINE, Texas, Aug 19, 2010 (BUSINESS WIRE) -- GameStop Corp. (NYSE: GME), the world's largest video game and entertainment software retailer, today reported sales and earnings for the second fiscal quarter ended July 31, 2010.

     

    Financial Results

    Total sales for the second quarter increased 3.4% to $1.80 billion, in comparison to $1.74 billion in the prior year quarter. Comparable store sales increased 0.9%, primarily attributable to sell through of new hardware systems and new video game titles. Strong market share gains contributed to a 5.3% increase in new video game software sales.

    The top five selling games during the quarter were Rockstar Games' Red Dead Redemption, Nintendo's Super Mario Galaxy 2, THQ's UFC Undisputed 2010, StarCraft II: Wings of Liberty by Blizzard Entertainment and EA Sports' NCAA Football 11.

    Net earnings for the second quarter increased 4.2% to $40.3 million, as compared to net earnings of $38.7 million in the prior year quarter. Diluted earnings per share increased 13.0% to $0.26, as compared to $0.23 in the prior year quarter.

    J. Paul Raines, Chief Executive Officer, said, "GameStop's second quarter results demonstrate the resiliency of our business model as we achieved both top-line and earnings growth despite the ongoing volatility in the global economy. Our U.S. operations were strong relative to the industry with solid comparable store sales and continued new video game market share gains. Internationally, we continue to focus on the execution of GameStop's buy-sell-trade model to improve operational efficiencies."

    Dan DeMatteo, Executive Chairman, stated, "Based on the outstanding initial results of our new customer loyalty program and selling downloadable content (DLC) in stores, we will accelerate and complete the national roll-out of both programs in the third quarter. Additionally, we purchased Kongregate, a leading social gaming destination, to advance our digital strategy. These investments are evaluated with a focus of increasing return on invested capital over a period of time. In addition, we are reviewing the use of excess cash to enhance shareholder returns."

    The company also announced that during the second quarter, it completed its $300 million share repurchase program. GameStop repurchased and retired 2,520,400 shares of its common stock at an average cost of $20.93 per share, spending the remaining $52.8 million available.

    Year-to-date, GameStop has opened 99 net new stores: 48 in the U.S., 35 in Europe, 6 in Canada and 10 in Australia/New Zealand.

    Updated Guidance

    Based on the success of the company's new PowerUp Rewards loyalty program and in-store DLC sales pilot, these two initiatives will be rolled out nationally during the third quarter. GameStop is adjusting its third quarter diluted earnings per share guidance to range from $0.35 to $0.38 to account for incremental expenses related to these programs as well as for the upfront expenses of the Kongregate acquisition and investments in e-commerce.

    GameStop is maintaining its full year diluted earnings per share guidance range of $2.58 to $2.68, representing a 14% to 18% increase over fiscal 2009. The company projects that $0.03 per share of earnings will be realized in the fourth quarter from these new customer initiatives and the launch of Microsoft's Kinect.

    The company expects comparable store sales for the third quarter to range from +3.0% to +6.0% and full year comparable store sales are still expected to range from flat to +2.0%.

    About GameStop

    Headquartered in Grapevine, TX, GameStop Corp., a Fortune 500 and S&P 500 company, is the world's largest video game and entertainment software retailer. The company operates 6,549 retail stores in 17 countries worldwide. The company also operates e-commerce sites, including GameStop.com, and publishes Game Informer(R) magazine, a leading multi-platform video game publication. GameStop Corp. sells new and used video game software, hardware and accessories for video game systems from Sony, Nintendo, and Microsoft. In addition, the company sells PC entertainment software, related accessories and other merchandise. General information on GameStop Corp. can be obtained at the company's corporate website: http://www.gamestopcorp.com.

    Safe Harbor

    This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, the outlook for fiscal 2010, future financial and operating results, projected store openings, the company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of GameStop's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. GameStop undertakes no obligation to publicly update or revise any forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the inability to obtain sufficient quantities of product to meet consumer demand, including console hardware; the timing of release of video game titles for next generation consoles; the risks associated with expanded international operations and the integration of acquisitions; the impact of increased competition and changing technology, including alternative methods of distribution, in the video game industry; and economic and other events that could reduce or impact consumer demand. Additional factors that could cause GameStop's results to differ materially from those described in the forward-looking statements can be found in GameStop's Annual Report on Form 10-K for the fiscal year ended January 30, 2010 filed with the SEC and available at the SEC's Internet site at http://www.sec.gov or http://investor.gamestop.com.

    GameStop Corp.
    Statements of Operations
    (in thousands, except per share data)
    13 weeks 13 weeks
    ended ended
    July 31, 2010 Aug 1, 2009
    Sales $ 1,799,093 $ 1,738,504
    Cost of sales 1,282,267 1,243,098
    Gross profit 516,826 495,406
    Selling, general and administrative
    expenses 404,964 384,773
    Depreciation and amortization 42,235 39,677
    Operating earnings 69,627 70,956
    Interest expense, net 10,038 11,275
    Earnings before income
    tax expense 59,589 59,681
    Income tax expense 19,761 20,996
    Consolidated net income 39,828 38,685
    Net loss attributable to noncontrolling interests 515 -
    Consolidated net income attributable to GameStop $ 40,343 $ 38,685
    Net income per common share:
    Basic1 $ 0.27 $ 0.23
    Diluted1 $ 0.26 $ 0.23
    Weighted average common shares
    outstanding:
    Basic 151,250 164,636
    Diluted 154,154 167,857

    Percentage of Sales:

    Sales 100.0 % 100.0 %
    Cost of sales 71.3 % 71.5 %
    Gross profit 28.7 % 28.5 %
    SG&A expenses 22.5 % 22.1 %
    Depreciation and amortization 2.3 % 2.3 %
    Operating earnings 3.9 % 4.1 %
    Interest expense, net 0.6 % 0.7 %
    Earnings before income
    tax expense 3.3 % 3.4 %
    Income tax expense 1.1 % 1.2 %
    Consolidated net income 2.2 % 2.2 %
    Net loss attributable to noncontrolling interests 0.0 % 0.0 %
    Consolidated net income attributable to GameStop 2.2 % 2.2 %

    1 Basic net income per share and diluted net income per share are calculated based on consolidated net income attributable to GameStop.

    GameStop Corp.
    Statements of Operations
    (in thousands, except per share data)
    26 weeks 26 weeks
    ended ended
    July 31, 2010 Aug 1, 2009
    Sales $ 3,881,790 $ 3,719,257
    Cost of sales 2,794,183 2,681,738
    Gross profit 1,087,607 1,037,519
    Selling, general and administrative
    expenses 808,800 760,605
    Depreciation and amortization 84,748 77,504
    Operating earnings 194,059 199,410
    Interest expense, net 19,612 22,956
    Debt extinguishment expense - 2,862
    Earnings before income
    tax expense 174,447 173,592
    Income tax expense 59,780 64,474
    Consolidated net income 114,667 109,118
    Net loss attributable to noncontrolling interests 848 -
    Consolidated net income attributable to GameStop $ 115,515 $ 109,118
    Net income per common share:
    Basic1 $ 0.76 $ 0.66
    Diluted1 $ 0.74 $ 0.65
    Weighted average common shares
    outstanding:
    Basic 152,408 164,555
    Diluted 155,319 167,915

    Percentage of Sales:

    Sales 100.0 % 100.0 %
    Cost of sales 72.0 % 72.1 %
    Gross profit 28.0 % 27.9 %
    SG&A expenses 20.8 % 20.4 %
    Depreciation and amortization 2.2 % 2.1 %
    Operating earnings 5.0 % 5.4 %
    Interest expense, net 0.5 % 0.6 %
    Debt extinguishment expense 0.0 % 0.1 %
    Earnings before income
    tax expense 4.5 % 4.7 %
    Income tax expense 1.5 % 1.8 %
    Consolidated net income 3.0 % 2.9 %
    Net loss attributable to noncontrolling interests 0.0 % 0.0 %
    Consolidated net income attributable to GameStop 3.0 % 2.9 %

    1 Basic net income per share and diluted net income per share are calculated based on consolidated net income attributable to GameStop.

    GameStop Corp.
    Balance Sheets
    (in thousands, except per share data)
    July 31, Aug 1,
    2010 2009
    ASSETS:
    Current assets:
    Cash and cash equivalents $ 289,348 $ 197,856
    Receivables, net 44,299 40,119
    Merchandise inventories 1,129,495 1,099,325
    Prepaid expenses and other current assets 103,333 84,898
    Deferred taxes 19,324 22,137

    Total current assets

    1,585,799 1,444,335
    Property and equipment:
    Land 13,514 11,590
    Buildings & leasehold improvements 535,841 504,595
    Fixtures and equipment 747,068 675,168
    1,296,423 1,191,353
    Less accumulated depreciation and amortization 721,089 612,197

    Net property and equipment

    575,334 579,156
    Goodwill, net

    1,924,210

    1,948,178
    Other noncurrent assets 277,616 310,467
    Total assets $

    4,362,959

    $ 4,282,136
    LIABILITIES AND STOCKHOLDERS' EQUITY:
    Current liabilities:
    Accounts payable $ 624,958 $ 615,364
    Accrued liabilities 529,419 480,287
    Total current liabilities 1,154,377 1,095,651
    Other long-term liabilities 118,840 113,493
    Senior notes payable, net of discount 447,798 495,807
    Total liabilities 1,721,015 1,704,951
    Stockholders' equity:
    Preferred stock - authorized 5,000 shares; no shares
    issued or outstanding -- --
    Class A common stock - $.001 par value; authorized 300,000 shares;

    150,352 and 164,661 shares outstanding, respectively

    150

    165
    Additional paid-in-capital 1,046,762 1,325,492
    Accumulated other comprehensive income

    82,767

    121,920
    Retained earnings 1,513,270 1,129,608

    Equity attributable to GameStop Corp. stockholders

    2,642,949

    2,577,185
    Equity attributable to noncontrolling interest (1,005 ) -
    Total equity

    2,641,944

    2,577,185
    Total liabilities and stockholders' equity $

    4,362,959

    $ 4,282,136
    Schedule I
    GameStop Corp.
    Sales Mix
    13 Weeks Ended 13 Weeks Ended
    July 31, 2010 Aug 1, 2009
    Percent Percent
    Sales of Total Sales of Total
    Sales (in millions):
    New video game hardware $ 314.3 17.5 % $ 301.3 17.3 %
    New video game software 663.2 36.9 % 629.8 36.2 %
    Used video game products 565.5 31.4 % 560.8 32.3 %
    Other 256.1 14.2 % 246.6 14.2 %
    Total $ 1,799.1 100.0 % $ 1,738.5 100.0 %
    Schedule II
    GameStop Corp.
    Gross Profit Mix
    13 Weeks Ended 13 Weeks Ended
    July 31, 2010 Aug 1, 2009
    Gross Gross
    Gross Profit Gross Profit
    Profit Percent Profit Percent
    Gross Profit (in millions):
    New video game hardware $ 25.9 8.2 % $ 21.6 7.2 %
    New video game software 141.7 21.4 % 133.6 21.2 %
    Used video game products 260.0 46.0 % 256.9 45.8 %
    Other 89.2 34.8 % 83.3 33.8 %
    Total $ 516.8 28.7 % $ 495.4 28.5 %

    SOURCE: GameStop Corp.

    Media Contact:
    Chris Olivera
    Vice President,
    Corporate Communications
    GameStop Corp.
    (817) 424-2130
    or
    Investor Contact:
    Matt Hodges
    Director,
    Investor Relations
    GameStop Corp.
    (817) 424-2130