GameStop Corp., a Fortune 500 company headquartered in Grapevine, Texas, is a global, multichannel video game and consumer electronics retailer. GameStop operates over 5,800 stores across 14 countries. The company's consumer product network also includes www.gamestop.com; Game Informer® magazine, the world's leading print and digital video game publication; ThinkGeek, www.thinkgeek.com, the premier retailer for the global geek community featuring exclusive and unique video game and pop culture products; and Simply Mac, which sells the full line of Apple products including laptops, tablets, and smartphones and offers Apple certified warranty and repair services.
The video game industry has historically been cyclical and is affected by the introduction of next-generation consoles, which could negatively impact the demand for existing products or our pre-owned business.
We depend upon the timely delivery of new and innovative products from our vendors.
If we fail to keep pace with changing industry technology and consumer preferences, we will be at a competitive disadvantage.
Technological advances in the delivery and types of video games and PC entertainment software, as well as changes in consumer behavior related to these new technologies, could lower our sales.
Our sales of collectibles depend on popularity of and trends in pop culture, and our ability to react to them.
We depend on licensed products for a substantial portion of our sales of collectibles and our inability to maintain such licenses and obtain new licensed products would adversely affect our sales of collectibles.
Our ability to obtain favorable terms from our suppliers may impact our financial results.
If our vendors fail to provide marketing and merchandising support at historical levels, our sales and earnings could be negatively impacted.
Pressure from our competitors may force us to reduce our prices or increase spending, which could decrease our profitability.
Failure to attract and retain executive officers and other key personnel could materially adversely affect our financial performance.
Damage to our reputation could adversely affect our business and our relationships with our customers.
International events could delay or prevent the delivery of products to our suppliers.
Our international operations expose us to numerous risks.
Changes to tariff and import/export regulations may negatively impact our future financial condition and results of operations.
Unfavorable changes in our global tax rate could have a negative impact on our business, results of operations and cash flows.
Restrictions on our ability to purchase and sell pre-owned video game products or pre-owned mobile devices could negatively affect our financial condition and results of operations.
Sales of video games containing graphic violence may decrease as a result of actual violent events or other reasons, and our financial results may be adversely affected as a result.
An adverse trend in sales during the holiday selling season could impact our financial results.
Our results of operations may fluctuate from quarter to quarter.
Failure to successfully transfer customers and sales from closed stores due to under performance to nearby stores could adversely impact our financial results.
If we are unable to renew or enter into new leases on favorable terms, our revenue may be adversely affected.
We rely on centralized facilities for refurbishment of our pre-owned products. Any disruption to these facilities could adversely affect our profitability.
If our management information systems fail to perform or are inadequate, our ability to manage our business could be disrupted.
If we do not maintain the security of our member, customer, employee or company information, we could damage our reputation, incur substantial additional costs and become subject to litigation.
Litigation and the outcomes of such litigation could negatively impact our future financial condition and results of operations.
Legislative actions and changes in accounting rules may cause our general and administrative and compliance costs to increase and impact our future financial condition and results of operations.
As a seller of certain consumer products, we are subject to various federal, state, local and international laws, regulations, and statutes relating to product safety and consumer protection.
Our Board of Directors could change our dividend policy at any time.
We recognized substantial impairment charges in fiscal 2018 and any future impairment charges on our goodwill and intangible assets could negatively impact our results of operations.
The terms of our Senior Notes and senior credit facility may impose significant operating and financial restrictions on us.
To service our indebtedness, we will require a significant amount of cash. We may not be able to generate sufficient cash flow to meet our debt service obligations.
Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional debt. This could further increase the risks associated with our leverage.
Net sales decreased $261.8 million, or 3.1%, in fiscal 2018 compared to fiscal 2017. The decrease in net sales was primarily attributable to fiscal 2017 including 53 weeks compared to 52 weeks in fiscal 2018, the impact of 117 store closures (net of openings), the negative impact of foreign exchange rate fluctuations and a decrease in comparable stores sales of 0.3%. Sales for the 53rd week included in fiscal 2017 were approximately $132.7 million. The decrease in comparable store sales was primarily the result of a decrease in sales of pre-owned and value video game products and new video game software, partially offset by an increase in sales of video game accessories and collectibles.
Cost of sales decreased $85.0 million, or 1.4%, in fiscal 2018 compared to fiscal 2017, primarily as a result of the change in net sales discussed above as well as the changes in gross profit discussed below.
Gross profit decreased $176.8 million, or 7.1%, in fiscal 2018 compared to fiscal 2017, and gross profit as a percentage of net sales decreased to 27.9% in fiscal 2018 compared to 29.1% in fiscal 2017. Gross profit for the 53rd week included in fiscal 2017 was approximately $34.7 million. The decrease in gross profit was primarily driven by decreases of $166.7 million in pre-owned and value video game products and $64.7 million in new video game software, which were partially offset by increases of $57.5 million in video game accessories and $25.1 million in collectibles.