GameStop Corp. (NYSE: GME), today reported results for the fourth quarter and fiscal year ended January 30, 2021.

Achieved 6.5% Increase in Comparable Store Sales During Fourth Quarter, With Global E-Commerce Sales Increasing 175% for the Fourth Quarter and 191% for Fiscal 2020

Expense Reduction Initiatives Drove $409 Million, or 21%, SG&A Improvement in Fiscal 2020

Strengthened the Balance Sheet and Ended Fiscal 2020 With $635 Million in Total Cash, Laying the Foundation for Transformation

Announces the Appointment of Technology Veteran Jenna Owens as New Chief Operating Officer

Fourth Quarter Fiscal 2020 Overview

• Comparable store sales increased 6.5%;
• Net sales were $2.122 billion compared to $2.194 billion in the fiscal 2019 fourth quarter, reflecting an operating environment that included a 12% decrease in the store base due to the Company’s strategic de-densification efforts and a reduction of approximately 27% in European store operating days during the quarter as a result of temporary store closures in response to the COVID-19 pandemic;
• Global E-Commerce sales (included in comparable store sales) increased 175% and represented 34% of net sales in the fiscal 2020 fourth quarter versus 12% of net sales in the fiscal 2019 fourth quarter;
• Gross margin was 21.1%, a decline of 610 basis points compared to the fiscal 2019 fourth quarter, reflecting an expected mix shift toward lower margin console sales in response to the launch of generation 9 consoles, increased freight and credit card fees associated with the shift to E-Commerce sales, and a broader promotional stance;
• Selling, general and administrative expenses were $419.1 million, a decline of $92.6 million, or 18%, from $511.7 million in the fiscal 2019 fourth quarter, driven by the Company’s cost optimization initiatives;
• Income tax expense was a benefit of $69.7 million due to a change in the tax status of certain foreign entities, and the impact of the CARES Act, including tax benefits associated with the availability of a five-year carryback period for certain current year tax losses (which compares to income tax expense of $43.8 million in the fiscal 2019 fourth quarter), and;
• Net income was $80.5 million, or $1.19 per diluted share on 67.8 million shares outstanding and included a $1.03 per share tax benefit as described above, as compared to diluted earnings per share of $0.32 in the fiscal 2019 fourth quarter.     Adjusted net income was $90.7 million or $1.34 per diluted share, compared to adjusted net income of $83.8 million or $1.27 per diluted share in the prior year fourth quarter.

Fiscal 2020 Overview

• Comparable store sales decreased 9.5%;
• Net sales were $5.090 billion compared to $6.466 billion in fiscal 2019, reflecting an operating environment that included the impact of operating during the wind-down of the seven-year-old prior console cycle, a 12% decrease in the store base due to the Company’s strategic de-densification efforts, which was partially offset by recaptured sales via nearby stores and E-commerce, and a significant reduction in global store operating days as a result of temporary store closures in response to the COVID-19 pandemic at various times throughout the year;
• Global E-Commerce sales (included in comparable stores sales) increased 191% increase for the fiscal year and represented nearly 30% of total net sales;
• Gross margin was 24.7%, a decline of 480 basis points compared to the prior year primarily driven by the expected mix shift toward lower margin console sales in response to the launch of generation 9 consoles, increased freight and credit card fees associated with the shift to E-Commerce sales and a broader promotional stance;
• Selling, general and administrative expenses were $1.514 billion compared to $1.923 billion from the prior year, a reduction of $408.5 million, or 21.2% from the prior fiscal year;
• Income tax in fiscal 2020 was a benefit of $55.3 million driven by a change in the tax status of certain foreign entities and the impact of the CARES Act, including tax benefits associated with the availability of a five-year carryback period for certain current year tax losses, compared to income tax expense of $37.6 million in the prior fiscal year;
• Net loss of ($215.3) million, or ($3.31) per diluted share compared to net loss of ($470.9) million, or ($5.38) per diluted share in the prior fiscal year. Adjusted net loss of ($138.8) million or ($2.14) per diluted share compared to adjusted net income of $19.1 million or $0.22 per diluted share in fiscal 2019, and;

Executed on financial and operational initiatives

• Delivered a $408.5 million, or a 21.2% reduction in SG&A expense in fiscal 2020 compared to fiscal 2019, primarily driven by continued cost optimization initiatives
• Strategically de-densified the Company’s store base by closing a net 693 stores in fiscal 2020 while transferring sales to online platforms and neighboring locations;
• Achieved 30% decrease in inventory at fiscal year-end, leading to annualized inventory turns of 5.9x as compared to 4.4x in the prior year, and a 10% decrease in accounts payable at fiscal year-end as compared to fiscal 2019.
• Ended fiscal 2020 with $635 million of cash and restricted cash;
• Reduced overall debt by $57 million, including a $125 million voluntary redemption of the Company’s 6.75% senior notes due 2021;
• Completed exchange offer and consent solicitation for $216.4 million of unsecured notes;
• Completed five sale leaseback transactions related to office buildings and the sale of a corporate travel asset, contributing approximately $95.5 million towards total liquidity, and;
• Completed the wind down of operations in Denmark, Finland, Norway and Sweden.

George Sherman, GameStop’s chief executive officer, said, “I am proud of how our entire organization came together in 2020 to adapt to the challenging pandemic environment, effectively serve our customers’ demand for gaming and entertainment products, and navigate through the year with strong liquidity and a strengthened balance sheet. Our execution led to a profitable fourth quarter that included a 6.5% comparable store sales growth, a 175% increase in global E-Commerce sales and a $92.6 million reduction in SG&A. The past year also saw us take steps to accelerate our de-densification efforts and streamline our store footprint, leverage our retail locations to provide same-day delivery and curbside pickups, and continue to enhance our suite of E-Commerce platforms. We also added important experience to our board by appointing several new directors with backgrounds in corporate finance, E-Commerce and technology and subsequently established a strategy-focused committee to accelerate our transformation.”

“We are off to a strong start in 2021 as February comparable store sales increased 23%, led by continued strength in global hardware sales. As we look ahead, we are excited by the opportunities that are in front of us as we begin prioritizing long-term digital and E-Commerce initiatives while continuing to execute on our core business during this emerging console cycle. Our emphasis in 2021 will be on improving our E-Commerce and customer experience, increasing our speed of delivery, providing superior customer service and expanding our catalogue,” Sherman concluded.

Capital Structure and Liquidity Update
As of January 30, 2021, the Company had $635 million in cash and restricted cash compared to $513.5 million in cash and restricted cash in the prior year. The Company’s outstanding borrowings under its asset-based revolving credit facility were $25 million, which were subsequently repaid as of March 15, 2021.

As of January 30, 2021, the Company had $146.7 million of short-term debt and $216.0 million of long-term debt on its balance sheet. During the fourth quarter, as previously announced on November 10, 2020, the Company announced the voluntary early redemption of $125 million in principal amount of its 6.75% senior notes due 2021, on December 11, 2020. On March 15, 2021, the Company fully redeemed the remaining $73.2 million of its 6.75% senior notes due 2021, reflecting the Company’s strategy to strengthen its balance sheet, improve its debt profile and optimize its capital structure.

As of March 15, 2021, following the pay down of outstanding borrowings under the Company’s asset-based revolving credit facility and the redemption of its 6.75% senior notes due in 2021, the Company had $48.5 million of short-term debt and $216.0 million of long-term debt remaining on its balance sheet.

Corporate Update
During the fiscal 2020 fourth quarter, the Company added three new members — Alan Attal, Ryan Cohen and Jim Grube — to its Board of Directors (the “Board”). The Board subsequently formed a Strategic Planning and Capital Allocation Committee (the “Committee”) to identify initiatives that can further accelerate the Company’s transformation. The Committee is comprised of Mr. Attal, Mr. Cohen, and Kurt Wolf, with Mr. Cohen serving as Chairperson. Since the Committee’s formation in late January 2020, the Company has appointed a Chief Technology Officer and several other executives with experience in E-Commerce, customer care and technology. In March 2021, the Company appointed Jenna Owens as its Chief Operating Officer. Ms. Owens has spent the majority of the past decade in executive roles at Amazon and Google.

The Company is continuing to actively pursue senior talent with E-Commerce, retail and technology experience in order to transform the business over the long-term. In the near-term, the Company is continuing to position its brick-and-mortar footprint and digital assets to capitalize on the emerging console cycle and additional gaming opportunities.

Starting with the first quarter of fiscal 2021, the Company intends to modify its method of communicating its quarterly financial results.  These communications will include a press release with the required disclosures and will be accompanied by a presentation to include detailed supplemental financial disclosures, financial statements and other operational highlights, accessible via the Company’s Investor Relations home page at  http://investor.GameStop.com/.

2021 Strategic Initiatives
GameStop is focused on transforming into a customer-obsessed technology company that delights gamers. The Board and management are taking the below steps in fiscal year 2021:

• Investing in technology capabilities, including by in-sourcing talent and revamping systems, and evaluating next-generation assets;
• Building a superior customer experience;
• Expanding product offerings;
• Modernizing U.S. fulfillment operations to improve speed of delivery and service;
• Establishing a U.S.-based customer care operation, and;
• Leveraging the Company’s digital assets, including Game Informer and PowerUp Rewards, to increase market share within the growing online gaming community.

2021 Outlook
During 2021, the Company will focus on its transformation while also capitalizing on the emerging console cycle and navigating the COVID-19 pandemic. The Company is continuing to suspend guidance at this time. Further, as a result of prolonged pandemic related store closures which began in March 2020, which will impact the calculation of comparable store sales this year, the Company does not currently intend to report this metric in fiscal 2021. The Company believes total net sales is the more appropriate metric to evaluate the performance of the business at this time. As the Company continues to reposition during 2021, it will continue to evaluate the metrics that it believes will most effectively inform investors of the Company’s performance, development and outlook.

Webcast and Conference Call Information
A webcast with GameStop management is scheduled for March 23, 2021, at 5:00 p.m. ET to discuss the Company’s financial results and can be accessed on GameStop’s investor relations home page at  http://investor.GameStop.com/.   The phone number for the call is 877-451-6152 and the confirmation code is 13715567.     This webcast will be archived for two months on GameStop’s corporate website.

About GameStop
GameStop, a Fortune 500 company headquartered in Grapevine, Texas, is a leading specialty retailer offering games and entertainment products through its E-Commerce properties and thousands of stores. Visit www.GameStop.com to explore our products and offerings. Follow @GameStop and @GameStopCorp on Twitter and find us on Facebook at  www.facebook.com/GameStop.

Non-GAAP Measures and Other Metrics
As a supplement to our financial results presented in accordance with U.S. generally accepted accounting principles (GAAP),  GameStop  may use certain non-GAAP measures, such as adjusted SG&A, adjusted operating income (loss), adjusted net income (loss), adjusted diluted earnings (loss) per share, adjusted EBITDA and free cash flow. We believe these non-GAAP financial measures provide useful information to investors in evaluating our core operating performance. Adjusted selling, general and administrative expenses (“Adjusted SG&A”), adjusted operating income (loss), adjusted net income (loss) and adjusted earnings (loss) per share exclude the effect of items such as transformation costs, asset impairments, store closure costs, severance, non-operating tax charges, as well as divestiture costs. Results reported as constant currency exclude the impact of fluctuations in foreign currency exchange rates by converting our local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our current period reported results. Our definition and calculation of non-GAAP financial measures may differ from that of other companies.     Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company’s financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company’s financial position, results of operations or cash flows and should therefore be considered in assessing the Company’s actual and future financial condition and performance. A complete definition of comparable store sales can be found in the Company’s Form 10-K for the fiscal year ended January 30, 2021, being filed on the