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Entertainment & Leisure

Jeffrey S. Thomison, CFA J.J.B. Hilliard, W.L. Lyons, LLC 502.588.9137 / JThomison@hilliard.com April 21, 2011

COMPANY UPDATE / RATING CHANGE
Key Metrics
GME - NYSE (as of 4/20/11) Price Target 52-Week Range Shares Outstanding (mm) Market Cap. ($mm) 3-Mo. Average Daily Volume Institutional Ow nership Long-Term Debt/Total Capital (1/11) ROE (1/11) Book Value/Share (1/11) Price/Book Value Dividend Yield LTM EBITDA Margin (1/11) $26.35 N/A $17.7-$26.94 152 $3,707 4,650,585 91% 8% 13.4% $18.3 1.4x Nil 8.8%

GameStop Corp.
GME — NYSE — Neutral-3 Lowering Rating to Neutral Investment Highlights We are lowering our rating on GME to Neutral from Buy. This downgrade is based solely on recent share price appreciation and not company fundamentals. In the calendar year-to-date period, GME shares are up 15% compared to a 6% increase for the S&P 500. More recently, over the past month the stock is up 24% versus a 2% gain for the overall market. Most importantly, GME has nearly reached our former price target of $27 per share. The company recently conducted its first ever investor conference and sentiment seemed to improve considerably following the event. We were impressed with the company’s extensive slide show presentation, which covered a multi-faceted strategy including maximizing the potential of the store base, improving the high-margin pre-owned game business, focusing on digital sales opportunities, and deploying free cash flow. We believe overall business risk has declined over the past few quarters. The trend toward digital sales has seemingly gone from a perceived threat to an attractive opportunity for GameStop, the videogame industry’s largest retailer. Recent management team additions, some acquisitions, and new business ventures have collectively improved the company’s digital prospects considerably, in our view. Although the stock valuation remains somewhat appealing to us, we believe a favorable earnings outlook and improving digital prospects are largely factored in the share price. Our previous price target of $27 reflected a 9.0 multiple applied to our FY12 EPS estimate. With this target nearly realized (much earlier than we expected), we are inclined to move to the sidelines for now as we prefer a lower price for purchases.

EPS FY 1/31* (excludes nonrecurring items)
2009 $0.43 $0.23 $0.32 $1.29 $2.27 11.6x 2010 $0.48 $0.26 $0.38 $1.56 $2.67 9.9x Prior 2011E ----Curr. 2011E $0.53 $0.28 $0.41 $1.62 $2.84 9.3x

1Q 2Q 3Q 4Q Year P/E

*Fiscal year ends Saturday clo sest to January 31o f the fo llo wing year. Quarterly EP S figures may no t add to annual figure due to ro unding.

Revenue ($mm)
2009 $1,981 $1,738 $1,835 $3,524 $9,078 2010 $2,083 $1,799 $1,899 $3,693 $9,474 Prior 2011E ----$9,810 Curr. 2011E ----$10,060

1Q 2Q 3Q 4Q Year

Company Description: GameStop Corp. is the world’s largest videogame retailer. The company sells new and pre-owned software, hardware, and accessories for current gaming systems and the PC. The company recently operated 6,670 stores in 17 countries. GameStop also operates e-commerce sites, owns browser-based game site Kongregate.com, and publishes Game Informer magazine (the largest multi-platform videogame magazine in the U.S.).

Note Important Disclosures on Pages 5-6. Note Analyst Certification on Page 5.

members have listed over 90 million games they own. GME management has painted a relatively bright picture for the current fiscal year.com. as currently less than half of customers are buying used games and less than 20% are trading in (selling) games. PowerUp members are spending more than 3x the amount of non-members. debt retirement and stock buybacks may continue. as could acquisitions. GameStop conducted its first-ever investor conference near its Grapevine. A deep. and digital issues of Game Informer magazine. 2011 On April 1. and e-commerce. Management recognized a changing industry landscape in 2008 and began developing business plans related to downloadable content. senior level management team participated. with the packaged goods segment holding steady. The company’s packaged good segment seems to have firmed up and numerous high-profile releases are slated for the coming quarters. International operations have recently improved and much opportunity exists for adding stores in high growth markets and closing stores in underperforming markets. in our view. management expects 12-15 million by the end of 2011. and utilization of free cash flow. OUTLOOK Despite an uncertain consumer spending environment. 2011. market share gains. Over the past year. In addition. Texas headquarters. Hilliard Lyons Equity Research 2 Entertainment & Leisure . growth of digital revenue streams. The PowerUp customer loyalty program has exceeded expectations and holds much potential. The PowerUp customer loyalty program was recently launched and has already grown to over 8 million members. Recent acquisitions should boost GME’s digital capabilities: Spawn Labs owns patented technology for digital streaming of videogames and Impulse. New stores in underserved markets have relatively flexible leases and generate strong returns. We were unable to attend the conference live. which helps GME in terms of selling downloadable content for certain games or boosting its pre-owned game business by means of targeted marketing. has a digital distribution platform that specializes in downloading of games to Internet-connected devices. greater profitability of store base from strategic downsizing. downloadable content via in-store kiosks. INVESTOR CONFERENCE HIGHLIGHTS April 21. GME expects its total digital sales to grow at more than twice this rate. Compounded annual growth for worldwide industry digital sales is expected at about 15% through 2014. but listened via webcast. Higher earnings and lower capital spending needs should boost free cash flow by 10% in 2011. the company made available its 80-page slide presentation. We believe the conference had a favorable impact on investor sentiment. the company seems to be a key participant in the industry trend toward digital sales of videogames. and insight on the company’s digital sales strategies was encouraging. Greater efficiencies could result from selected closing of overlapping retail stores that resulted from past acquisitions. Inc. the company’s share of such releases has increased due to strong marketing campaigns and coordinated efforts from the major publishers. Below are some highlights from the slide presentation. Earnings growth could come from continued expansion of the PowerUp loyalty program.GameStop Corp. and investment community concerns regarding digital sales of videogames. same-store sales growth at retail stores. in our view. Finally. rather than a potential victim. including recent hires. The global gaming market is estimated to grow about 6% annually through 2014. we believe the trend of digital sales has evolved from perceived threat to attractive opportunity for the videogame industry’s largest retailer. customer loyalty program. full-game PC downloads. Digital opportunities include sale of videogame content at GameStop. Opportunities exist in the high-margin pre-owned business. recent sluggishness in industry sales. In sum. We expect the digital business to grow over 50% annually in the near term.

management has not seen an adverse impact on its stores from competitive entry into the used gaming sector. and is primarily based on these factors.84. and long-term risks associated with distribution of videogames.GameStop Corp. Our Suitability rating on GME is 3 on a 1-to-4 scale (1=most conservative. Other risk factors associated with investments in GameStop include changes or delays in publishers’ product release schedules. We could reinstate our purchase recommendation on a potential pullback in the share price. GME’s forward price/earnings multiple has been in the range of roughly 7 to 35 over the past five years. This is above recent valuations as low as 7 times estimated forward earnings. While the current multiple still seems relatively low. With our price target essentially realized (much earlier than we expected). at this early juncture. macroeconomic risk. but we believe GameStop has been pro-active in developing a digital sales strategy that seems. With recent considerable share price gains. We attribute GME’s relatively low valuation to several factors. VALUATION & OPINION April 21. the potential impact of competitive entry (such as the used game business). To date. ability to negotiate and integrate acquisitions. pricing acumen. we are inclined to move to the sidelines for now as we believe the shares could be susceptible to some profit-taking from shorter term investors. seasonality or dependence on holiday sales.00.0 applied to our preliminary FY12 EPS estimate of $3. and hardware manufacturers. Hilliard Lyons Equity Research 3 Entertainment & Leisure .3 times our FY11 EPS projection of $2. lease terms for stores. employee expertise. with an average multiple of about 11. a higher valuation than earlier this year or much of last year. 2011 GME shares are trading at 9.5. 4=most aggressive). relationships with and adequate supply from publishers. cyclicality of industry sales. RISKS & SUITABILITY Among concerns frequently raised by the investment community are competitive entry to the used game business and digital downloading of content by consumers. assuming no change in company fundamentals. our former price target of $27 was nearly realized. we believe a favorable earnings outlook and improving digital prospects are largely factored in the current price. to be effective. and geopolitical risks to international operations. including recent industry sluggishness. we feel GME has competitive advantages such as those related to inventory. and marketing. we believe considerable share price appreciation this year has reduced the stock’s near-term attractiveness. distributors. While new entrants to the used game business over the past year or so have raised some concern among investors. Digital distribution of videogames is likely to continue growing. This target reflected a price/earnings multiple of 9. Although the stock valuation has some appeal to us.

936.97% 22.124 403.675 0.536) (333) (515) $40.9% (1.627 92.37% 0.000 123.57% 16.5%) 6.65%) 8.624 1.595 44.89% 3.73%) (5.135 542.980.600 20.854 482.738.23% 8.51% 24.29% 3.605 43.02% 4.9% 12.71% 11.046 58.800 $1.839 39.13%) 4.56 152.000 6.00% 33.742 FY08 1Q 2Q 3Q 4Q FY09 1Q 2Q 3Q 4Q FY10 FY11E 10.36% 4.61% 4.700 6.84% 28.800 0 $237.004 37.79% 5.16% 28.945 111.40% 10.9% (7.124 25.23 $0.282.28% 14.524.281 627.28%) (5.781 516.255 1.Exhibit 1 Consolidated Statements of Income (figures in thousands except per share data and percentages) FY07 7.81%) 3.72% 6.56%) (3.264 10.280 $72.799.9% (7.589 38.51% 6.019 19.I. EBITDA Depreciation and Amortization Hilliard Lyons Equity Research 25.22% 3.32 $1.333 14.25% 1.17% 27.50% 28.0% (14.856 114. EBITDA Operating Income Net Income Note: Income statements exclude merger-related and debt extinguishment costs April 21.000 369.317 903.875 116.900 237.24% 18.63% 6.760 $296.438.834.23% 2.2% 24.173 $38.000 643.34% 7.098 1.72% 4.35% 23.81% 30.81% 7.93% 7.700.000 185.64% 2.50% 35.82% 18.40% (3. EBITDA Operating Income Net Income Tax Rate % Year-Over-Year Change Total Sales Cost of Sales SG&A Exp.084 874.11%) 11.774 453.19% 35.41% 3.647 156.84 145.56% 37.207 17.13% 21. to GameStop Diluted EPS Avg.95% 8. Attrib.727 3.6%) $2.077.4% 1.789.07% 4.19% 6.09% 7.1% 679.80 164.68% 18.88%) (29. Cost of Sales Gross Profit SG&A Exp.681 11.1%) 6.060.421 47.68% 4.753 1.000 22.49% 3. Net Income Loss Attrib. net Income Before Taxes Income Tax Expense Consol.450 3.474 $0.79% 17.08% 30.17% 6.000 6.18% 32.803 214.270 501.20% 7.113 495.57% 3.419 375.32% 13.386 379.09% 1.269 347.800 9.643.432 69.35% 34.684.473.97% 3.354 837.376.40 $0.210 483.51% 4.22% (3.916 1.345 1.118 2.37% 28.100 6.270 174.213 214.670 3.154 6.300 375.113 167.466 9.58% 4.391 11.536) $215.755 43.309 1.02% 5.48 $380.1% 3.813.152 3.700 2.511.789 $2.09%) (32.793 145.844 5.36% 7.88% 22.88% 13.41% 18.53% (4.635.7% 6.03% 38.000 45.86% 1.652 570.182.962 5.837 11.832 384.end of period Yr-over-yr store count % chg.60% 35.858 59.08% 4.38 153.15% 5.78% 27.8%) 6.000 231.78% 7.574 10.29 $2.55% 26.922 $1.16% 3.43 $0.16% 10.862 137.55% (3.77% 21.996 26.445.80% 26.267 1.92% 4.47% 13.899.450 3.24% Note: Fiscal year ends on Saturday closest to Jan.23% 38.275 10.9%) 6.4% 2.24%) (11.271 216.740 799.56% 14.773 391.000 1.495 42.99%) 0.606 3.997 2.000 850.45%) (5.681 79.39% 6.244) $411.874 390.87%) 4.697 1.773 59.033 124. 4 Stores .354 637.24% 2.09% 36.643 2.172 (1.671 167.887 (1.480 411.281 110.07% 11.5% (1.45% 6.000 2.99% 4.835 2.078 (396) $58.3% 6.528 166.245 14.91% (0.718 662. 2011 Entertainment & Leisure Source: GameStop and Hilliard Lyons estimates .61% 34.45% 0.486 3.712 128.74% 8.19% 134.100 6.5% (7.68% 26.520 $2.26 154.649.92% 9.670 824.11% (1.013 9.352.9%) 167.280.39%) 5.8% Total Sales GameStop Corp.27 $0.640 1.406 523.434.235 44.52% 0.066 74.34% (5.535.000 665.84% 6.73% 59.12% (3.67 154.31% 16.602 $75.9% $402.65% (18.513 42.454 70. to Noncontrol.691 130.790 40. N.049 2.09% 9. Diluted Shares Outst.13% 9.19% 16.537.01% 8.082.13% 24.90% 7.836 404.311. Int.633 131.599 593.038 9.25% (0.276 6.37% 8.87% 2.956 90.685 $53.66% 8.707 1.177 9.016 631.73% 22. 31 Operating Income Interest Expense.826 546.13% 36.000 7.964 408.897 1.85%) 10.19% 34.556 167.80% 8.13%) 7.700 6.484 6. % of Sales: Gross Profit SG&A Exp.716 166.552 35.51% 3.6% 1.14% 4.386 162.50% 25.15% 5.41% 19.827 39.972 167.834.692.828 238.37% 37.44% 35.01% 8.762 1.19% 36.86% 6.99% 4.761 640.4% 1.504 1.700 131.24% 33.243. Comparable-store sales % chg.56% 16.463 421.65% 13.39% 8.726 410.520 0 $411.53% 7.549 3.545 (1.677 41.4% 0.669 83.805.49% 4.803 337.670 3.857 168.1% 8.270.093.05%) (6.875 156.093 1.24% 4.964 6.33%) 24.343 $0.

A historically secure company which could be cyclical. am not. Investment Ratings Buy . Banking 0% 6% 1% 0% 100% No Banking 100% 94% 99% 100% 0% Hilliard Lyons Equity Research 5 Entertainment & Leisure . and may be used as a source of funds if better opportunities arise. is currently fully valued. Long-term Buy .We believe the stock is vulnerable to a price set back in the next 12 months. Jeffrey S. sporadic earnings or high leverage 4 . core holding with a solid history 2 .Speculative. inconsistent profitability. low trading volume or a narrow customer or product base Hilliard Lyons Recommended Issues # of % of Stocks Covered Stocks Covered Rating Buy 40 24% Long-term Buy 35 21% Neutral 89 53% Underperform 3 2% Restricted 1 1% As of 4 April 2011 Investment Banking Provided in Past 12 Mo. erratic revenue.An above average risk/reward ratio could be due to small size. and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report. and expect solid returns to be realized over a longer time frame than our Buy rated issues. due to small size.We believe the stock is an above average holding in its sector. volatility.We believe the stock has significant total return potential in the coming 12 months. Underperform . hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company(ies) and its (their) securities. They do not receive direct payments from investment banking activity.We believe the stock is an average holding in its sector.GameStop Corp. I also certify that I have not been. Additional information is available upon request. Analyst Certification April 21. has a shorter history than a "1" or is subject to event driven setbacks 3 . lack of product diversity. Suitability Ratings 1 . 2011 I. Important Disclosures Hilliard Lyons' analysts receive bonus compensation based on Hilliard Lyons’ profitability. Neutral . Thomison.A large cap.

financial situation or needs of individual investors. Hilliard. All rights reserved. W. W. but not limited to. J.J. LLC has entered into an agreement with Morgan Joseph TriArtisan LLC whereby Morgan Joseph TriArtisan LLC pays Hilliard Lyons based on revenues generated by Morgan Joseph TriArtisan LLC from Hilliard Lyons research. Reproduction is forbidden unless authorized.GameStop Corp.J. Other Disclosures Opinions expressed are subject to change without notice and do not take into account the particular investment objectives. W. Hilliard Lyons Equity Research 6 Entertainment & Leisure . This is for informational purposes and is not a solicitation of orders to purchase or sell securities. technical analysis or trading strategies that differ from the opinions expressed here. Employees of J. Hilliard. release written or oral commentary. 2011 Note: Price targets accompanying Buy ratings reflect a one year time period while price targets accompanying Long-term Buy ratings reflect a two to three year time period. Lyons. J. The information herein has been obtained from sources we believe to be reliable but is not guaranteed and does not purport to be a complete statement of all material factors.B.L.B. April 21. or serving as placement agent in private transactions. acting as an underwriter in an offering or financial advisor in a merger or acquisition. Lyons. Lyons. at times.L. LLC or its affiliates may.J. Hilliard. LLC is a multi-disciplined financial services firm that regularly seeks investment banking assignments and compensation from issuers for services including.L.B.