GME 2017 Annual Report

Letter To Our Shareholders In 2017, GameStop set out to deliver on strategic priorities designed to drive growth and deliver returns for our shareholders. Thanks to the passion and hard work of our associates around the world and their ability to navigate industry changes, we drove annual sales growth of 7% and delivered adjusted earnings per diluted share of $3.34. Throughout the year and particularly during the very important holiday period, we continued to demonstrate that our family of retail brands — GameStop, EB Games, Micromania, ThinkGeek, Zing Pop Culture, Spring Mobile AT&T and Simply Mac — are the preferred destinations for gaming, collectibles and consumer electronics merchandise at a great value. A few financial highlights from the year: Video Games: » Video game hardware sales grew 28%, driven by innovative new consoles like Nintendo Switch, the PS4 Pro and Xbox One X. » Video game software sales increased 4%, driven by the strong performance of new titles. Pop Culture: » Our global collectibles business grew 29%, further demonstrating that this business can be an accelerating contributor to our overall profitability. Global Omni-Channel: » Global omni-channel sales grew 49% in 2017, driven by investments we’ve made to improve the customer experience and our integrated channels. While we delivered solid results in 2017, generating $325 million in free cash flow and paying $155 million to shareholders in dividends, there are still many areas of our business that can be improved to further drive shareholder value. More specifically, we hold ourselves accountable for improving the performance in the Technology Brands and our pre-owned video game category. We believe we can do better. We are committed to finding ways to maximize profitability going forward. A key aspect to delivering on this goal is to take a pause on acquiring new businesses in the near-term. We can drive growth and improve profitability by focusing on the fundamentals of managing the three businesses that we already have — Video Games, Collectibles and Technology Brands. Once we improve the operating fundamentals of each and achieve the performance level we know they can attain, we will explore additional opportunities for growth to drive shareholder value. For 2018, we believe we are in position to once again deliver strong cash flows and earnings and that our near-term focus on improving the fundamentals of our businesses can position the company for long-term success. GameStop has long been committed to giving back to the communities we serve. As we look to 2018, we are evolving our corporate giving efforts through the introduction of our new GameStop Gives charity program, which will focus on using the power of gaming for good. Through partnering with charitable organizations like Make-A- Wish, Autism Speaks, Ronald McDonald House, Starlight Children’s Foundation, the Children’s Miracle Network and the Call of Duty Endowment, we believe gaming can and will empower the lives of our customers and their families. On behalf of our associates around the world, I would like to thank all of our stakeholders for their continued support of GameStop. Sincerely, Daniel A. DeMatteo Executive Chairman and Interim Chief Executive Officer