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GameStop Corp. Sales Up 13 Percent; Video Game Software Sales Increase 17 Percent; Second Quarter EPS Grows 18% to $0.13 at High End of Projected Range

GRAPEVINE, Texas--(BUSINESS WIRE)--Aug. 17, 2004--GameStop Corp. (NYSE:GME), the nation's largest video game and entertainment software specialty retailer, today reported sales and earnings for the second quarter ended July 31, 2004.

GameStop sales increased 13% to $345.6 million in the second quarter of 2004, compared with $305.7 million in the prior year quarter. Video game software sales were strong, growing 17%, with leading titles such as "NCAA Football 2005" from Electronic Arts, Inc., "Spider-Man 2" from Activision, Inc., and "ESPN NFL 2K5" from Sega of America and Take-Two Interactive, Inc. Comparable store sales declined by 2.4%, in line with expectations.

Net earnings for the second quarter increased to $7.7 million, compared with net earnings of $6.6 million in the prior year quarter. Diluted earnings per share increased 18%, to $0.13 per diluted share, as compared to $0.11 per diluted share in the prior year quarter.

New store sales performance exceeded our expectations, and we opened 77 stores during the quarter, bringing the total number of new stores opened so far this year to 180.

"We are pleased with our second quarter results, and are particularly happy about our earnings being at the high end of our projected range. In addition, as NPD data indicates, GameStop again continued to gain market share," said R. Richard Fontaine, Chairman and Chief Executive Officer. "We experienced strong hardware sales at the beginning of the second quarter due to price cuts on the Microsoft Xbox and Sony PlayStation 2 systems, and our in-store promotional activities; however, unanticipated hardware shortages in late June and July on the PlayStation 2, and to a lesser extent, Xbox, impacted the momentum that we had built earlier in the quarter. We are also very pleased with our continued margin growth and our overall software sales increase of 17%, particularly as we were up against very challenging software comparisons in the prior year's quarter."

Fontaine continued, "We believe we are well positioned to fully maximize the potential of the release of several very strong titles for the third and fourth quarters, which perhaps could be the most robust software line-up in the last five years."

During the second quarter, GameStop completed its previously announced $50.0 million stock buy-back program, acquiring approximately 959,000 shares for $15.0 million at an average price of $15.64 per share.

Guidance for the third quarter assumes comparable store sales will range from +4.0% to +6.0%, with earnings per diluted share between $0.20 and $0.21. We continue to believe that full-year 2004 earnings per diluted share will range from $1.20 to $1.24.

A conference call with GameStop Corp.'s management will be simulcast on the Web at (http://www.gamestop.com) beginning at 11:00 AM ET on August 17, 2004, and will be accessible at (http://www.gamestop.com/investor-relations), where it will be archived until September 1, 2004.

About GameStop Corp.

Headquartered in Grapevine, Texas, GameStop Corp. (NYSE:GME) is the nation's largest video game and entertainment software specialty retailer, based on the number of U.S. stores and U.S. revenues. The company operates 1,676 retail stores throughout 49 states, the District of Columbia, Puerto Rico and Ireland, primarily under the GameStop(R) brand. In addition, the company owns a commerce-enabled Web property, GameStop.com, and Game Informer(R) magazine, a leading video and computer game publication.

GameStop Corp. sells the most popular new software, hardware and game accessories for the PC and next generation video game systems from Sony, Nintendo, and Microsoft, and is also the industry's largest reseller of used video games. In addition, the company sells computer and video game magazines and strategy guides, action figures, and other related merchandise to more than 30 million customers.

Barnes and Noble, Inc. (NYSE:BKS), the world's largest bookseller, has approximately a 65 percent interest in GameStop. General information on GameStop Corp. can be obtained via the Internet by visiting the company's corporate Website: http://www.gamestop.com/investor-relations/.

SAFE HARBOR

This press release (including the attached schedules) contains "forward-looking statements." GameStop Corp. is including this statement for the express purpose of availing itself of the protections of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to all such forward-looking statements. These forward-looking statements are based on currently available information and represent the beliefs of the management of the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks include, but are not limited to, general economic and market conditions, seasonality, decreased consumer demand for the company's products, possible disruptions in the company's computer or telephone systems, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores or the inability to obtain suitable sites for new stores, possible disruptions or delays in successfully transferring the company's headquarters and distribution center to a new facility during 2004 and 2005, higher than anticipated store closing or relocation costs, higher interest rates, the performance of the company's online and other initiatives, the successful integration of acquired businesses, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, product shortages, and other factors which may be outside of the company's control. In addition, the video game industry has historically been cyclical in nature and dependent upon the introduction of new generation systems and related interactive software. Please refer to the company's reports on file with the SEC for a more detailed discussion of these and other risks that could cause results to differ materially.

                            GameStop Corp.
                       Statements of Operations
                (in thousands, except per share data)

                                      13 weeks            13 weeks
                                        ended              ended
                                    July 31, 2004       August 2, 2003
                                   ---------------    ----------------

Sales                             $       345,593    $        305,674
Cost of sales                             238,386             216,691
                                   ---------------    ----------------

   Gross profit                           107,207              88,983

Selling, general and administrative
    expenses                               85,965              71,262
Depreciation and amortization               8,697               6,872
                                   ---------------    ----------------

Operating earnings                         12,545              10,849

Interest expense (income), net               (194)               (207)
                                   ---------------    ----------------

Earnings before income
     tax expense                           12,739              11,056

Income tax expense                          5,067               4,450
                                   ---------------    ----------------

Net earnings                      $         7,672    $          6,606
                                   ===============    ================

Earnings per common share:
     Basic                        $          0.14    $           0.12
     Diluted                      $          0.13    $           0.11

Weighted average common shares
     outstanding:
     Basic                                 56,620              56,764
     Diluted                               59,533              60,193

Percentage of sales:
--------------------------------------

Sales                                       100.0%              100.0%
Cost of sales                                69.0%               70.9%
                                   ---------------    ----------------

Gross profit                                 31.0%               29.1%

SG&A expenses                                24.9%               23.3%
Depreciation and amortization                 2.5%                2.2%
                                   ---------------    ----------------

Operating earnings                            3.6%                3.6%

Interest expense (income), net               (0.1)%                 -%
                                   ---------------    ----------------

Earnings before income
     tax expense                               3.7%               3.6%

Income tax expense                             1.5%               1.4%
                                   ---------------    ----------------

Net earnings                                   2.2%               2.2%
                                   ===============    ================
                            GameStop Corp.
                       Statements of Operations
                (in thousands, except per share data)

                                         26 weeks         26 weeks
                                           ended            ended
                                       July 31, 2004    August 2, 2003
                                      --------------  ----------------

Sales                                $      717,329  $        627,415
Cost of sales                               504,582           452,991
                                      --------------  ----------------

   Gross profit                             212,747           174,424

Selling, general and administrative
    expenses                                172,591           139,797
Depreciation and amortization                16,841            13,089
                                      --------------  ----------------

Operating earnings                           23,315            21,538

Interest expense (income), net                 (347)             (586)
                                      --------------  ----------------

Earnings before income
     tax expense                             23,662            22,124

Income tax expense                            9,312             8,907
                                      --------------  ----------------

Net earnings                         $       14,350  $         13,217
                                      ==============  ================

Earnings per common share:
     Basic                           $         0.25  $           0.23
     Diluted                         $         0.24  $           0.22

Weighted average common shares
     outstanding:
     Basic                                   56,805            56,924
     Diluted                                 59,832            60,215

Percentage of sales:
----------------------------------

Sales                                         100.0%            100.0%
Cost of sales                                  70.3%             72.2%
                                      --------------- ----------------

Gross profit                                   29.7%             27.8%

SG&A expenses                                  24.1%             22.3%
Depreciation and amortization                   2.3%              2.1%
                                      --------------- ----------------

Operating earnings                              3.3%              3.4%

Interest expense (income), net                    -%            (0.1)%
                                      --------------- ----------------

Earnings before income
     tax expense                                3.3%              3.5%

Income tax expense                              1.3%              1.4%
                                      --------------- ----------------

Net earnings                                    2.0%              2.1%
                                      =============== ================
                            GameStop Corp.
                            Balance Sheets
                (in thousands, except per share data)

                                        July 31, 2004   August 2, 2003
                                       --------------  ---------------
ASSETS:
Current assets:
  Cash and cash equivalents              $    159,748     $   144,147
  Receivables, net                              6,547           6,213
  Merchandise inventories                     184,059         156,374
  Prepaid expenses and other current
   assets                                      14,628          11,054
  Prepaid taxes                                11,968          13,818
  Deferred taxes                                7,661           6,034
                                       --------------   --------------
    Total current assets                      384,611         337,640
                                       --------------   --------------

Property and equipment:
  Land                                          2,000               -
  Leasehold improvements                       77,042          48,072
  Fixtures and equipment                      154,557         112,395
                                       --------------   --------------
                                              233,599         160,467
  Less accumulated depreciation and
   amortization                               100,088          68,802
                                       --------------   --------------
    Net property and equipment                133,511          91,665
                                       --------------   --------------

Goodwill, net                                 320,888         320,691
Other noncurrent assets                         1,698           1,470
                                       --------------   --------------
    Total assets                         $    840,708     $   751,466
                                       ==============   ==============


LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Accounts payable                       $    130,361     $   120,736
  Accrued liabilities                          89,965          68,452
                                       --------------   --------------
    Total current liabilities                 220,326         189,188

Deferred taxes                                 17,629           5,591
Other long-term liabilities                     3,319           3,410
                                       --------------   --------------
    Total liabilities                         241,274         198,189
                                       --------------   --------------
Stockholders' equity:
  Preferred stock - authorized 5,000
   shares; no shares issued or outstanding          -               -
  Class A common stock - $.001 par value;
   authorized 300,000 shares; 23,483
   and 21,349 shares issued and
   outstanding, respectively                       23              21
  Class B common stock - $.001 par
   value; authorized 100,000 shares;
   36,009 shares issued and outstanding            36              36
  Additional paid-in-capital                  516,813         496,970
  Accumulated other comprehensive
   income (loss)                                  125             (75)
  Retained earnings                           132,437          67,837
  Treasury stock, at cost, 3,263 and
   910 shares, respectively                   (50,000)        (11,512)
                                       --------------   --------------
   Total stockholders' equity                 599,434          553,277
                                       --------------   --------------
   Total liabilities and stockholders'
    equity                                   $840,708         $751,466
                                       ==============   ==============

                              Schedule I
                            GameStop Corp.
                           Retail Sales Mix

                                           13 weeks        13 weeks
                                             ended          ended
                                         July 31, 2004  August 2, 2003
                                          ------------- --------------

Video Game Hardware                             16%            16%
Video Game Software                             65%            61%
Video Game Accessories                          14%            12%
PC Software                                      4%             7%
PC Accessories and Other                         1%             4%

    CONTACT: GameStop Corp.
             Media Contact
             Lori M. Milovich, 817-424-2130
             Director, Public & Investor Relations
             or
             GameStop Corp.
             Investor Contact
             David W. Carlson, 817-424-2130
             Executive Vice President & Chief Financial Officer

    SOURCE: GameStop Corp.