This report provides a hold recommendation and $25.11 price target for GameStop (GME) stock. While GameStop dominates the used video game market, the shift to digital gaming threatens its business model. GameStop must acquire more digital companies to meet sales targets in this growing segment. However, its debt-free balance sheet positions it well to make additional acquisitions. Intensifying competition, particularly from retailers like Best Buy expanding their used game offerings, also poses a risk to GameStop's market share. The report uses discounted cash flow and comparable company/transaction analyses to arrive at the $25.11 price target.

1. CFA Student Research
This report is published for educational purposes only by
students competing in the CFA Institute Research
Challenge.
Ticker: NYSE: GME Recommendation: HOLD
Price: $23.72 Price Target: $25.11
Earnings/Share*
Apr. Jul. Oct. Jan. Year P/E
Ratio
2009A $0.42 $0.23 $0.31 $1.29 $2.25 8.8x
2010A 0.48 0.26 0.36 1.56 2.66 7.9x
2011E 0.56 0.22 0.39 1.92 3.09 N/A
2012E 0.53 0.29 0.41 1.70 2.93 8.6x
* On a diluted basis
GameStop Needs To “PowerUp” To Digital Realm
 Hold Rating On GameStop’s $25.11 Projected Stock Price: Per our financial projections and
valuation, we believe $25.11 is a fair 12-month target price for the stock. Based on our analysis,
several industry reports and Company guidance, our projections include three scenarios (Best,
Normal, Worst) concerning the Company’s used video products market share, used video products
gross margin, and digital market share growth rate. We used the Discounted cash flow analysis
(DCF), comparable companies, and comparable transactions to arrive at our target price.
 Shift In Electronic Gaming Industry To Digital Space: Technological advances in the internet
have increased its speed and bandwidth, making it easier for customers to download games directly.
This is bound to have a two-fold effect on GameStop as it will decrease new video game sales and
consequently cause a decline in used video game trade-ins.
 Competition Intensifies In Used Video Game Market: The competition in the ever-so-popular
used video game space may intensify to unprecedented levels. Although GameStop controls nearly
80% of the used video game market share, we firmly believe that trade-in programs of competitors
such as Best Buy will gain popularity and potentially diminish GameStop’s dominance. Large
players such as Best Buy and Wal-Mart have the resources to channelize marketing efforts to
capture additional share.
 Need For Additional Acquisitions To Further Succeed In a Digital Market: GameStop has
actively pursued strategic acquisitions to increase its presence in the digital market. With the
acquisition of Spawn Labs, Impulse, and Kongregate, the Company has positioned itself well in this
market. Management’s optimistic projections unveil a 50% CAGR in digital sales, reaching $1.5B
by 2014. We firmly believe that GameStop will have to acquire additional companies to meet their
sales targets and that the growth in this segment lies in the successful integration of future
acquisitions.
 Debt-free Balance Sheet Ameliorates GameStop’s Financial Position: In December 2011,
GameStop retired $125 million long term debt and established a debt-free balance sheet for 2012.
We believe the Company is poised to raise additional capital required to acquire companies in the
digital space. Further, the zero leverage also makes GameStop an attractive LBO candidate.
Source: Bloomberg, Yahoo!Finance
Source: Yahoo!Finance
*Represents the average closing stock price from Feb 1, 2012 to Feb 7, 2012
GameStop Corp.
February 7, 2012
Oleksandr Matviienko
Shiv Thukral
Abbie Fang
Xiao Wu
Computer and Electronics Retail
52 Week Price Range ($/Share) 18.34 - 28.66
Average Daily Volume 3,342,980
Beta 1.024
Dividend Yield Nil
Shares Outstanding (MM) 136.424
Market Capitalization (MM) 3,237.35
Institutional Holdings (%) 98.55
Insider Holdings (%) 1.35
Book Value per Share ($/Share) 21.71
Debt to Total Capital (%) 4.04
Return on Equity (%) 13.76
Market Profile
*All data is per last filing period. Current debt to capital = 0.
Holdings information is as on Feb 5, 2012

2. CFA Institute Research Challenge February 7, 2012
2
Investment Summary
We initiate coverage on GameStop with a hold rating and a target price of $25.11, a 5.82% increase from its
current stock price. GameStop is the world’s largest video game and entertainment software retailer. The
Company, ranked 255 on the Fortune 500 annual listing of public companies, operates 6,627 retail outlets
across 17 countries. By retiring $125 million of long term debt in December 2011, the Company is now debt-
free. Further, the Company is likely to meet its FY 2011 EPS guidance after repurchasing 2 million shares of
common stock.
Shift In Electronic Gaming Industry To Digital Space
GameStop is in the midst of a changing business environment as the industry is shifting away from consoles
and towards the digital market space. With the increased speed and bandwidth of the internet, it has become
very convenient for gamers to download digital content from their homes. Further, developers have created
online gateways where customers can download gaming content for a fee. As a result, GameStop’s new video
game sales may decline, causing a further decline in its used video game trade-ins.
Debt-free Balance Sheet Supports The Need For Additional Acquisitions in Digital Space
GameStop has made significant progress in the digital space. The Company acquired Spawn Labs, Impulse,
and Kongregate and positioned itself well in this segment. Management expects that digital sales will
increase by 50% CAGR to reach $1.5 B in 2014. We firmly believe that GameStop will have to acquire
additional companies to meet its sales targets and that the growth in this segment lies in the successful
integration of future acquisitions. Further, the debt-free balance sheet will help raise the requisite financing
on favorable terms. However, the zero leverage and steady cash flows may make GameStop also an attractive
LBO target.
Competition Intensifies In Video Game Market
Along with the transition to the digital space, the industry is also characterized by an increase in competition
levels, especially in the used products segment. GameStop operates in an industry where both suppliers and
buyers have significant bargaining power. In addition, there are a plethora of inexpensive substitutes
available for entertainment. Also, the presence of gigantic players such as Best Buy and Wal-Mart intensifies
the competition levels. At present, according to industry analysts, GameStop controls approximately 80% of
the used video products market. Even though the Company’s dominance is highly pronounced, we believe
that the trade-in programs of such players as Best Buy may potentially gain popularity, thereby depleting
GameStop’s share. Large players such as Target and Wal-Mart have ample resources at hand, and can
channelize targeted marketing efforts to capture additional used video product share.
Figure 1: GameStop Stock Price History
Note: Peer Group Average represents average stock returns of peer companies selected for this analysis (see Peer analysis
section)
Source: Bloomberg & Yahoo!Finance

3. CFA Institute Research Challenge February 7, 2012
3
Estimated Stock Price
ProbabilityDensity
$25.11
$28.87
$32.64
$21.34
$17.57
66%
95%
Figure 3: Price Probability
Distribution
Valuation
We give GameStop a Hold Rating and forecast that stock price will be trading at $25.11 at the end of the next
12 months. In calculating this target price we used DCF method as a primary price determinant, and
comparable companies and transaction multiples analysis to define a range of possible prices. The multiples
approach also served as a means to check the accuracy of the DCF output.
DCF Method
For DCF valuation, free cash flow to firm was calculated and then discounted for 4Q2011 and FY2012-2015.
Additionally, we analyzed three scenarios: best-case, normal-case, and worst-case. Detailed explanations are
contained in Financial projections section. The price ranges for each of three scenarios were determined
using sensitivity (discount rate/terminal growth rate) tables. Normal-case DCF price was assumed to be the
base of our recommendation. Estimated WACC was 10.08%. Please, refer to Appendix 1 for WACC
calculation and Appendix 2 for the DCF model.
Comparable Companies Method
We used such metrics as EV/Sales, EV/EBITDA and P/E as a base for multiples approach in general.
Moreover, we used trailing and forward multiples to determine both current and expected market valuation
metrics. Peer analysis section describes companies which were selected as a base for this approach and
analyzes GameStop’s relative standing among its peers. Trailing max/min multiples for GameStop were
determined using average and median peers’ multiples. Please, refer to Appendix 3 for detailed data.
Combined with GameStop’s respective financial metrics, this analysis yielded the price range between $17
and $24. The relatively low valuation on EV/Sales can be explained by GameStop’s current relatively high
EV/Sales multiple. Please refer to Appendix 4 for details. Further, forward multiples analysis was done for
FY2011 and FY2012. Max/min multiples for GameStop were determined using average and median peers’
multiples. Combined with GameStop’s respective financial metrics, this analysis yielded the price range
between $16 and $24 for FY2011 and $15 and $23 for FY2012. Please refer to Appendix 5 and 6 for details.
Comparable Transactions Method
Four transactions within the last two years were selected as comparable. They involved companies which
were engaged in specialty electronics retail operations. Please, find the description of selected transactions as
well as target companies’ description in Appendix 7.
Max/min multiples for GameStop were determined using average and median comparable transaction
multiples. Combined with GameStop’s respective financial metrics, this yielded the price range between $28
and $36. It is worth noting that transaction multiples valuation, as a rule, gives higher price range because
valuation multiples include acquisition premium. This yielded higher results in comparison to comparable
companies’ method. Please refer to Appendix 8 for detailed results.
Valuation Results Reconciliation
Based on the analyses presented above, the given “football field” graph presents a reconciliation of valuation
results obtained by using different methods.
Figure 4: GameStop Valuation “Football Field”
Source: CFA University Team
15.00 20.00 25.00 30.00 35.00
Trans EV/Sales, EV/EBITDA combined
Trailing peers, EV/Sales
Trailing peers, EV/EBITDA
Trailing peers, P/E
FY2011 peers, EV/Sales
FY2011 peers, EV/EBITDA
FY2011 peers. P/E
FY2012 peers, EV/Sales
FY2012 peers. EV/EBITDA
FY2012 peers, P/E
DCF range
Current Price:
$24
DCF PRICE:
$25
GAMESTOP'S
VALUATION
FOOTBALL
FIELD
Figure 2: Valuation Methodology
Source: CFA University Team
Source: CFA University Team

4. CFA Institute Research Challenge February 7, 2012
4
Figure 5: Video Products
Markets Projections
Figure 6: GameStop’s Global
Market Share and Total Gross
Margin
Source: GameStop, EIU, Bloomberg, CFA
University Team
Risks to the Price Target
Further, we have conducted a risk analysis to our target price estimation. Please refer to Appendix 9 for
details.
Financial Projections
We projected various line items on GameStop’s financial statements such as revenue, cost of goods sold,
other operating expenses, working capital accounts, capital expenditures, and other operating and non-
operating items. These projections were performed using historical data, trends, and various financial and
economic agencies such as Bloomberg, Reuters, NPD Group, and Economist Intelligence Unit (EIU). The
most important drivers for GameStop’s valuation model are described below.
Total Video Game and Products Market Dynamics
We projected market for new video software and hardware, PC entertainment software, and other related
products separately for USA, Canada, Australia and Europe. These projections were based on historical
figures provided in GameStop’s 10-Ks, data on projected industry dynamics from NPD Group, and expected
household audio and video equipment nominal market demand growth from EIU.
We projected market dynamics for digital mobile, social, console, and PC games based on historical 2010
numbers for north-american market ($6 billion) and expected 2014 figure ($12 billions), as given in
GameStop’s 10-K. We extrapolated north-american digital market dynamics to market dynamics in Europe
and Australia to have separate projections for geographical regions GameStop operates in.
We projected used video products market dynamics separately for USA, Canada, Australia, and Europe. This
forecast was based on industry analysts data concerning used video product market in North America in 2010
and our analysis on potential market in Europe and Australia which was based on historical inter-relations
between market for new video software and hardware, PC entertainment software, and other related products
in North America, Europe and Australia. Further, the analysis included GameStop’s revenue from used video
products market from all geographical locations shares dynamics. We also used personal disposable income
(in PPP terms) expected growth rates from EIU to forecast used video product market dynamics.
GameStop’s Market Share Dynamics
We forecast GameStop’s market share for each geographical market. The forecasts were based on historical
market shares dynamics and various statistical techniques used to extrapolate the historical performance into
the future (exponential smoothing and moving averages). Further, the analysis included our considerations of
general industry trends and anticipated dynamics such as entrance of new competitors into used video
products market, competition concentration in digital video market, Power-Up rewards program expansion
etc. We created three scenarios concerning GameStop’s used video product market share in FY2015 and
digital market share growth which eventually drove our revenue projections. The detailed analysis is given in
Scenario and Sensitivity analyses section. Please find detailed dynamics of GameStop’s market shares in
different markets according to different scenarios in Appendix 10.
Gross Profit Margin Dynamics
We forecast gross profit margins separately for GameStop’s main products. The forecast was based on
historical data and used various statistical tools (exponential smoothing and moving averages) to extrapolate
expected future dynamics, while taking into account the seasonality of gross profit margins as well as
projected product mix shift towards digital content and anticipated increase in digital and used products
competition. We created three case scenarios concerning GameStop’s used video product margin in FY2015.
The detailed analysis is given in Scenario and Sensitivity analyses section. Please find detailed dynamics of
GameStop’s gross profit margins according to various scenarios in Appendix 11.
Other Operating Items
Such items as capital expenditures, acquisitions, working capital needs, depreciation and amortization, share
repurchases were taken into account when we created GameStop’s financial model. The capital expenditures
forecast was based on management’s projections for FY2011 and were adjusted to take into account the
projected depreciation and disposal rates. Further, these projections also included the anticipated EIU’s
Producer Price Index (PPI) projections going forward. Acquisitions were projected based on GameStop’s
average historical acquisition budget, adjusted for PPI index going further. The split of acquisition
expenditures between PPE and Intangibles (which depreciate and amortize, respectively), and goodwill, was
made according to historical split between these items from GameStop’s acquisition history. The projection
of capital and acquisition expenditures is consistent with anticipated digital market revenue and profit growth
rates. Further, they reflect both recent digital acquisitions trend and management’s strategy concerning an
operational shift into digital industry. The depreciation and amortization rate was forecast based on the
average useful life of assets in online retail/digital industry and the projected decrease in physical store count.
Working capital items were forecast based on the GameStop’s historical data as well as peer average figures,
Source: GameStop, EIU, CFA University
Team

5. CFA Institute Research Challenge February 7, 2012
5
Figure 7: Working Capital
Accounts
Figure 8: Sensitivity Analysis
Figure 10: Liquidity, Efficiency
& Leverage Analysis
Source: Bloomberg, CFA University Team
combined with projected revenue and cost of goods sold. As of January 2012, GameStop had approximately
$330 million remaining from announced earlier share repurchase program. We assumed this amount would
be spent evenly through FY2012-2015 on share repurchases. We forecast average share repurchase price
equal to our fair value price of $25.11. We forecast no dividend payments and terminal growth rate of 2.5%,
which is consistent with GameStop’s projected revenue growth rates and anticipated long-term US and global
GDP growth rates.
Scenario and sensitivity analyses
We believe complete investment analysis should entail several scenarios dependent on key value drivers. One
of the most important value drivers for GameStop are: 1) the used video game market share projections; 2)
the projected digital market share growth rate; and 3) the projected used video game margins.
The best-case scenario is based
on management’s projections
concerning digital revenue
($1.5 billion in FY2014), from
which we have derived implicit
expected digital market share
growth rate. Further, the best-
case scenario incorporates
management comments
concerning the anticipated
strengths of used products
business. The Normal-case
scenario is based on industry
trends, EIU, NPD forecasts, and
different statistical methods used to derive key drivers. Worst-case scenarios represent depressed normal-case
projections, as well as some industry experts’ forecasts. Further, we conducted additional sensitivity analysis
across the aforementioned scenarios by varying 1) Weighted Average Cost of Capital and 2) Terminal
Growth Rate.
Therefore, based on the results of a given analysis we can determine the ultimate price range of DCF results
taking into account various scenarios and sensitivity factors: $19-$35. The lower range represents intersection
point of worst-case and normal-case share prices and upper range represents intersection of normal-case and
best-case share prices. Please refer to Appendix 12 for detailed results of the DCF valuation according to
different scenarios.
Financial Analysis
Financial analysis is crucial in evaluating current financial position of GameStop, which will give a necessary
perspective on the company’s prospects and, therefore, build a base for a DCF analysis.
Balance Sheet & Financing
Historically, current assets represented around 43-45% of total assets. Merchandise inventories and cash
items were the major current assets representing 39-41% of total assets, while goodwill and net PP&E were
major long-term assets representing 49-51% of total assets. On the liabilities side, current liabilities were in
the order of 33-42% of total assets. Long-term liabilities, mainly in form of long-term borrowings,
represented 4-11% of total liabilities and equity. Finally, equity, mainly in form of additional paid-in capital
and retained earnings represented historically 55-57% of total assets. Main transformations, which occurred
with balance sheet structure, are stipulated by GameStop’s acquisitions. These acquisitions caused decrease
in cash by 22% and made goodwill the major item of the GameStop’s assets in 2010. Further, by redemption
of all of the long-term debt, accounts payable became a major item on a liabilities side in 2011. For detailed
balance sheet analysis please refer to Appendix 13.
Liquidity analysis: GameStop liquidity ratios are lower than its peer group average indicating a certain degree
of illiquidity. Moreover, historically, these ratios have been deteriorating.
Efficiency Analysis: GameStop is less efficient in managing its assets when compared to peer group averages.
However, the Company is more effective in managing its working capital needs than its peers. It takes
GameStop on average 2-3 days to collect its receivables and 58-79 days to sell off the inventory, by contrast,
peer average for collecting A/R is 12-13 days and for inventory is 83-97 days. This results in significantly
lower WC percentages for GameStop, which helps Company to conserve cash for its strategic needs.
Leverage Analysis: GameStop has historically and currently much less debt than its peers which makes the
Company a safer investment, as well as an attractive target for an LBO. This also helps GameStop to preserve
some cash for acquisitions or other strategic initiatives by not requiring to service any debt. Moreover,
current D/E is zero as the Company paid all of its outstanding debt in December 2011.
25.11 -1.0% -0.5% 0.0% 0.5% 1.0%
-1.0% 67.95 82.20 105.46 150.24 272.04
-0.5% 33.49 $ 35.96 $ 38.96 $ 42.71 47.50
0.0% 23.13 $ 24.06 $ 25.11 $ 26.31 27.69
0.5% 18.15 $ 18.61 $ 19.12 $ 19.67 20.28
1.0% 15.23 15.49 15.78 16.08 16.41
NORMAL CASEANALYSIS
TERMINAL GROWTHRATE
DISCOUNT
RATE
Items 2010H 2011E 2012F 2013F 2014F 2015F
A/R days 2.5 2.5 2.5 2.5 2.5 2.5
Inventory
days
60.8 64.6 68.5 72.3 77.1 80.0
A/P and
accruals
days
86.3 79.8 79.8 79.8 79.8 79.8
NWC as
% of
Sales
-2.85% -1.32% -0.56% 0.20% 1.15% 1.72%
Historical and Projected Working Capital Accounts
43.35 -1.0% -0.5% 0.0% 0.5% 1.0%
-1.0% 127.44 155.51 201.32 289.50 529.38
-0.5% 59.72 $ 64.58 $ 70.51 $ 77.89 87.33
0.0% 39.46 $ 41.29 $ 43.35 $ 45.71 48.42
0.5% 29.77 $ 30.68 $ 31.67 $ 32.76 33.96
1.0% 24.11 24.64 25.20 25.80 26.45
BEST CASEANALYSIS
TERMINAL GROWTHRATE
DISCOUNT
RATE
12.65 -1.0% -0.5% 0.0% 0.5% 1.0%
-1.0% 27.93 32.95 41.16 56.96 99.95
-0.5% 15.68 $ 16.55 $ 17.61 $ 18.94 20.63
0.0% 11.95 $ 12.28 $ 12.65 $ 13.07 13.56
0.5% 10.12 $ 10.28 $ 10.46 $ 10.66 10.87
1.0% 9.02 9.12 9.22 9.33 9.44
WORSTCASEANALYSIS
TERMINALGROWTHRATE
DISCOUNT
RATE
1.2 Liquidity analysis
2009 2010 3Q2011 2009 2010 3Q2011
Current ratio 1.28 1.23 1.06 1.70 1.63 1.64
Quick ratio 0.65 0.51 0.29 0.74 0.63 0.55
GameStop Peer GroupAverage
1.3. Efficiency analysis
2009 2010 3Q2011 2009 2010 3Q2011
Total Assets
turnover 1.92 1.89 1.84 2.38 2.44 2.33
A/R days 2.61 2.49 2.33 12.36 12.93 13.13
Inventory
days 58.50 60.81 78.87 85.89 83.64 97.25
A/P days 55.21 52.35 129.50 42.71 41.68 48.11
WC as % of
sales 5.2% 4.3% 1.4% 11% 11% 11%
GameStop Peer Group Average
1.4. Leverage analysis
2009 2010 3Q2011 2009 2010 3Q2011
Total Debt to
Equity 16.43% 8.60% 4.21% 61.15% 48.41% 55.14%
Peer Group AverageGameStop
Source: GameStop, CFA University Team
Source: CFA University Team
Scenario analysis
Scenario Description
DCF-derived
share price
Best-case
FY 2015 US used video products market share is 85% and used video
products gross margin is 13.5%, US digital market share CAGR growth rate
for FY2011-FY2015 is 35%, $43.35
Normal-case
FY 2015 US used video products market share is 70% and used video
products gross margin is 11.5%, US digital market share CAGR growth rate
for FY2011-FY2015 is 20%, $25.11
Worst-case
FY 2015 US used video products market share is 40% and used video
products gross margin is 10%, US digital market share CAGR growth rate
for FY2011-FY2015 is 5%, $12.65
S ource:GameS top, Bloomberg, Tulane CFA
Figure 9: Scenario Analysis
Source: CFA University Team

6. CFA Institute Research Challenge February 7, 2012
6
Figure 11: Profitability &
Solvency Analysis
Source: Bloomberg, CFA University Team
Figure 12: Z-score Analysis
Source: Bloomberg, CFA University Team
Figure 13: Cash Flow Analysis
Source: Bloomberg,Tulane CFA
Source: Bloomberg, CFA University Team
Source: GameStop, EIU
Figure 14: Key Industry Data
Figure 15: Transforming Elecronic Gaming Industry
Source: GameStop, Bloomberg, CFA University Team
Earnings
Gross margin has been consistently improving for past three years, however, operating profit margin has been
consistently deteriorating primarily because of increased SG&A and depreciation margins. This, in turn, has
caused the net income margins to diminish. Sales growth was moderate 3-4% for past three years and was
enough to offset cost of sales growth (2-4%). However, the growth in sales was insufficient to offset
increased SG&A and DD&A, which resulted in a declining net income. FY2010, however, was an exception:
bottom line growth was 8%, primarily, due to slowdown in SG&A and DD&A margin growth. Earnings per
share, on other hand, demonstrated solid growth primarily due to aggressive share repurchases. Please, refer
to Appendix 14 for detailed calculations.
Profitability Analysis: GameStop’s profitability is generally similar to its peer group average. ROE is slightly
lesser than peer average, however, ROA is slightly higher than peer average. On the margin side, when
compared to its peers, GameStop has a weaker Gross margin, however, a stronger EBITDA and Net Income
margins.
Solvency Analysis: GameStop, as well as its peers, are solvent companies: EBIT is more than ten times higher
than interest expenses. Despite the fact that GameStop’s interest coverage was historically lower than its
peers, as of the third quarter of 2011 its solvency is stronger. Additionally, we calculated GameStop’s Z score
from 2007 to 2011 Q3. Although GameStop’s Z-score decreasing trend is observable , we believe it is not a
sign of near future financial problems, as it is still well above the 2.99 hurdle. Refer to Appendix 15 for
detailed data.
Cash Flows
GameStop generated positive net cash flows in 2006 and 2007 as the Electronic Gaming Industry expanded.
Although the cash flow from operations steadily grew from 2006 to 2009, the Company invested enormous
amounts to expand geographically by opening additional stores to satisfy the increasing demand, thereby
making the total cash flow negative in 2008. While competition intensified in the used products markets, the
stock price dipped and the Company issued a $500 M share repurchase program in 2010. Going forward, we
anticipate the Company to be cash flow positive with investments in the growing digital market space.
Industry Overview and Competitive Positioning
The video game market has experienced a plunge in terms of growth rates in recent past. Per industry
estimates, the US video game industry dropped from $22 billion in 2008 to $18.5 billion in 2010. According
to industry analysts, the industry is experiencing a major shift towards online gaming and away from console
games. One of the major reasons for this shift is the end of the current cycle of the consoles with no new
consoles on the horizon till the end of 2012.
Another major trend in the industry is that
the developers believe that the ever-so-
popular Trade-In programs, now adopted
by most players, are eroding their profit
margins. In retaliation, the developers
have increasingly placed digitally
downloadable content for a fee to hinder
the use of such programs. In fact, some
developers have created online passes,
which require the consumer to pay a fee to
use any online content. Thus far, these
measures have not created much impact,
but as the industry tilts further towards
online gaming, it is bound to negatively
impact gaming providers. According to
industry sources, console internet access is
expected to penetrate the gaming industry
in the next few years, and the video
gaming industry may closely resemble the
PC gaming market where digital distributers retain a bulk of the market share. In fact, the next generation
Nintendo console is already focused on revamping social online gaming for consoles and it is expected that
Microsoft and Sony would follow suit.
Because online content causes hindrance in profits from used sales, developers have an enhanced incentive
for pushing for this change. Also, with the availability of inexpensive substitutes such as mobile applications,
free-to-play social media games, consumers are reluctant to pay upfront costs for online gaming merchandise.
2.2. Profitability analysis
2009 2010 3Q2011 2009 2010 3Q2011
ROIC* 13.43% 13.30% 12.34% 13.89% 12.83% 12.83%
ROA 7.97% 8.14% 7.84% 6.97% 6.15% 4.94%
ROE 15.02% 14.52% 13.76% 18.39% 15.14% 13.82%
Gross
margin 26.82% 26.79% 29.07% 33.33% 33.66% 33.02%
EBITDA
margin 8.81% 8.84% 6.83% 7.23% 7.79% 6.89%
NI
margin 4.16% 4.31% 2.77% 3.16% 2.73% 0.51%
*For GME was calculated taking into account existence of
operating leases
GameStop Peer Group Average
2.3 Solvency analysis
2009 2010 3Q2011 2009 2010 3Q2011
Interest
coverage 14.03 17.91 14.45 18.26 19.77 11.01
GameStop Peer Group Average

7. CFA Institute Research Challenge February 7, 2012
7
Figure 16: GameStop’s
Competitive Advantage
Source: CFA University Team
Figure 17: Future Consoles
Source: Bloomberg
Figure 18: Projected Industry
Trends
Source: EIU
Figure 19: Companies’ USA
Market Shares
Source: Bloomberg, CFA University Team Source: Bloomberg, CFA University Team
Figure 20: Porter’s Five Forces
Consequently, industry experts estimate that developers may also shift away from traditional pricing
strategies supporting the sale of games at a discount and making up the difference through DLC sales. With
these drastic changes predicted, companies such as GameStop would benefit very little from their Trade-In
programs as customers would be encouraged to connect their consoles to the internet to access online content.
Because of this shift, GameStop will have to pursue an asset-light strategy and shift their sales from physical
stores to digital sales. This would reduce the Company’s Property, Plant & Equipment and will require it to
make and integrate acquisitions to maintain its brand equity.
Players in the Industry: Cost Leaders or Product Differentiators?
The level of competition in the electronic game industry has increased manifold over the past few years. With
large merchants such as Wal-Mart, Best Buy, Amazon and Target as key players, the players in the industry
have tilted towards being a cost-effective rather than distinguishing themselves with inimitable products from
exotic suppliers. The industry itself competes with other forms of entertainment such as movies, television,
theatre, sporting events, and family entertainment centers.
GameStop and other key players have adopted Trade-In programs that allow customers to purchase new
gaming inventory at discounts or through store credits when they return used games. These discounts and
store credits characterize the cost-effectiveness of the industry. However, GameStop strives to distinguish
itself with high quality human capital providing exceptional service to its customers.
Porter’s Five Forces Analysis
Bargaining Power of Suppliers: the bargaining power of suppliers is determined by their number, penetration
in the market, and industry trends. There are numerous suppliers to the Gaming industry but it is dominated
by certain key players such as Microsoft, Nintendo, and Sony. Large suppliers such as the ones mentioned
control a majority of the market share, supplying a major chunk of the inventory to gaming companies. For
example, in 2011, 72% of the new games purchased by GameStop were supplied by just five developers,
indicating a high bargaining power of suppliers.
Further, the developers are increasingly generating downloadable content for a fee which forces customers to
purchase the digital inventory. This action is targeted to discourage the “trading-in” of used games for
discounts on new ones. Given that the used-game market constitutes a major portion of the players’ revenues,
we believe that the suppliers will continue to have a high bargaining power in the industry.
Bargaining Power of Buyer: the buyer of this industry has a plethora of choices to purchase gaming software
and hardware platforms. The players in the industry comprise of large and well-spread out retail chains such
as Wal-Mart, Best Buy, Amazon, and Target along with established brands such as GameStop, Game Fly etc.
Further, the buyer also has other avenues for entertainment such as mobile applications and free-to-play
social media games. Even though companies such as GameStop have reward programs that provide discounts
and store credits to customers, we believe that the buyer still has a moderately low switching cost. Given the
large number of choices of gaming vendors and moderately low switching costs, we believe that the buyers
pose a moderate-to-high bargaining power in this industry.
Availability of Substitutes: the gaming industry has numerous entertainment substitutes. The substitutes
include movies, television, theater, sporting events, and family entertainment centers. Even though the
substitutes are large in number and popular sources of entertainment and may be appealing to some video
store customers, we believe that a “gaming-geek” would continue to prefer games over other modes of
entertainment. Therefore, we believe that the threat of substitutes is moderate in this industry.
Threat of New Entrants: the gaming industry poses high barriers to entry for new players. The infrastructure
cost of developing stores is high and new
players will find it difficult to raise adequate
capital to fulfill this need. Further, most
gaming players rely on an established brand
identity built through channelized marketing
efforts. New Entrants may find it difficult to
penetrate a saturated market such as this one
to effectively compete in the industry. Further,
we also believe that players in this industry
depend heavily on strong relationships with
developers, which would be hard to nurture
for a new entrant. Given the reasons
mentioned above, we believe that the industry
poses a low threat of new entrants.
Competition: the video gaming industry in the
US has seen an unprecedented increase in the
level of competition in the past few years.
Players such as Wal-Mart, Best Buy lever
upon their existing operations to provide

8. CFA Institute Research Challenge February 7, 2012
8
Figure 21: Revenue Breakdown
Source: GameStop
Figure 22: GameStop’s History and Milestones
Source: GameStop, CFA University Team
Figure 23: Map of Operations
Source: GameStop
Figure 24: GME’s Video Store
Count
Source: Bloomberg
gaming inventory to a wide range of customers. Companies such as Amazon have also been able to capture
additional market share through its well-known brand identity, thereby enhancing the level of competition in
the gaming market space. Even though, the above mentioned companies do not have well established trade-in
programs, experts believe that streamlined marketing efforts will enable these firms to create one, thereby
increasing the level of competition. Also, with the high bargaining power of suppliers, moderate-to-high
bargaining power of buyers, and availability of viable substitutes, the competitive dynamics governing this
industry tighten further. The Herfindahl index calculations yielded the result of approximately 0.09, which
indicates that the industry is unconcentrated, thus, relatively competitive.
SWOT Analysis
On the basis of the Company’s standing and the industry trends, we have conducted a SWOT analysis. For
details, please refer Appendix 16.
Business Description
GameStop’s History
GameStop’s predecessor
Babbage’s
was set-up in 1996 and was
renamed GameStop in 1999, after
Barnes & Noble acquired it.
GameStop became an independent
company in 2002 when it spun off
from its parent company at the
time, Barnes & Noble. Since then,
the Company has made a series of
acquisitions and opened numerous
stores across various geographical
locations.
In 2003, the Company acquired
controlling interest in an Irish
Electronic games retailer, Games
world Group. In 2004, GameStop procured 420,000 square feet facility in Grapevine, Texas which currently
serves as their global headquarters. Please refer to the table on the right for GameStop’s further history.
GameStop’s Geography:
GameStop operates across 17 countries in the western hemisphere. The Company operates predominantly in
the United States, Canada, Australia and several European countries. Some of the European countries include
Italy, Ireland, France, Germany, Spain, and the Nordic. In the first three quarters of 2011, approximately 70%
of the firm’s revenues came from operations in the United States. Revenue from Europe accounted for 18%,
while revenues from Australia and Canada were 6% and 5.3% respectively.
GameStop Operations & Strategy
GameStop is the world’s largest video game and entertainment software retailer. The Company, ranked 255
on the Fortune 500 annual listing of public companies, operates 6,627 retail outlets worldwide. The firm
operates these outlets under the names GameStop, EB Games, and Micromania. GameStop’s operations can
be broadly split into 4 categories: New Video Game Software, Used Video Products, Video Game Hardware
Platforms, Video Game Accessories such as digital, PC Entertainment Software, and Game Informer
magazine. Please find a detailed description of the Company’s main products in Appendix 17. Further, the
company also has established E-Commerce platforms through different websites across countries.
Customer Profile and Acquisition Strategy
GameStop caters to a wide range of customers across the globe. From teenagers and young adults to middle-
aged and elderly folks, the firm’s customers represent interest from hi-fi fighting games to low-key Sudoku.
Game Informer, the largest video game publication in the US, has more than 4 million paid subscribers.
The Company has attracted a large pool of customers through a plethora of marketing initiatives such as
loyalty programs, print, broadcast, and social media. GameStop launched the PowerUp rewards loyalty
program in 2010 which allows the customers the ability to register for a free or paid membership. The
membership provides customers to redeem points for discounts or additional merchandize as well as a
subscription to the Game Informer. Through this program, the Company has added approximately 15.5
million customers since October 2010. Further, the Australian version of the PowerUp program, called EB
World program, was launched in September 2011 and has attracted an additional 100,000 members.

9. CFA Institute Research Challenge February 7, 2012
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Figure 25: GameStop’s
Suppliers
Source: GameStop
Figure 26: GameStop’s Key
Digital Acquisitions
Source: GameStop
Figure 27: CFA Team Use of
Peer Analysis
Source: CFA University Team
Figure 28: Peer Analysis
Source: CFA University Team
Supplier Profile
GameStop has a vast number of suppliers but the purchases its makes is not evenly distributed. In fact, the
Company depends heavily on a handful of suppliers for the procurement of majority of its merchandise. In
2011, the Company purchased approximately 72% of its inventory from five suppliers: Microsoft, Nintendo,
Sony, Activision, and Electronic Arts.
Recent Developments
GameStop has been very active in making its financial statements look attractive. During the recent holiday
season, the Company retired $125 million long term debt, thereby establishing a debt-free balance sheet for
2012. Further, GameStop repurchased 2 million shares at an average price of $22.38 per share with 329.8
million remaining in its authorization. This allowed the Company to keep its FY2011 EPS guidance
unchanged after lowering same store sales guidance.
GameStop recently launched three android based gaming tablets in more than 200 stores. The tablets are
Acer's 7-inch ICONIA, the 10-inch Asus Eee Pad transformer, and the Samsung 10-inch Galaxy tab. They
come with 7 free games, Kongregate arcade, digital Game Informer, and a web application that provides
product advice and a list of games available with the android marketplace. As the Android sales are projected
to rapidly grow to $116 million by 2015, per industry reports, we believe the Company will be much
benefitted using this platform. The firm plans to exploit this opportunity to position itself as a key player in
the US Android tablet market. Further, in September 2011, GameStop launched iOS device trade-ins,
whereby gamers can obtain cash or in-store credits for their used iPads, iPhones, and iPods.
GameStop has made a series of strategic acquisitions to expand its presence in foreign markets and enhance
its competitiveness. GameStop merged with EB games in 2005 which allowed GameStop to enhance its
presence in the UK and Ireland. In 2008, GameStop acquired Micromania, a leading video game retailer in
France. In 2010, the Company acquired Kongregate and strengthened its digital platform and enhanced its
commitment to become the gaming aggregator of choice. In 2011, GameStop acquired Spawn Labs to
increase the spectrum of its digital game products and service offerings. Further, the Company acquired
Impulse to provide a digital distribution platform to quickly locate and download games through the internet.
Therefore, the Company’s strategy to acquire complementary firms serves as a unique methodology to
continuous growth. Please refer for an exhaustive list of acquisitions to Appendix 18.
Peer Analysis
GameStop operates in an industry that is mature and highly fragmented. Its competitors range from large-cap
companies like Wal Mart ($207 billion) and Target ($34 billion) to micro-cap companies like hhgregg ($361
million) and Game
Group ($160
million). To
conduct the peer
analysis we chose
companies which
have
similar to
GameStop’s
operations,
business model,
revenue structure,
and online
operations.
GameStop’s relative valuation is mostly superior to its peers as it has the highest EV/Sales and EV/
EBITDA multiples. Its P/E is also in the upper range. Combined with low debt levels it can be inferred that
market perceives GameStop as an industry leader. For detailed description of a peer companies please refer to
Appendix 19.
Investment Risks
GameStop is subject to a tremendous amount of risk which can be classified into Operational, Strategic, and
Financial risks, which may potentially tarnish its growth and sustainability. Key risks are detailed below.
Operations Risk
Enhanced dependence on few suppliers: the Company critically depends on few vendors for adequate and
timely development of software and hardware products. Further, GameStop’s sales are heavily correlated
with the timeliness of delivery of gaming inventory. If the vendors fail to provide quality hardware and
software on time, it could severely impact GameStop’s sales and brand image. Also, GameStop is heavily
dependent on a few suppliers. In 2011, 72% of the purchases made by the Company came from Microsoft,
% of Total
Purchase
1 Microsoft 18%
2 Nintendo 16%
3 Sony 16%
4 Activision 12%
5 Electronic Arts 10%
Total 72%
S. No. Supplier Name
Peer Analysis
Company Ticker Market cap Net debt P/E P/BV EV/Sales EV/EBITDA D/E ROIC Gross margin
GameStop Corp GME 3,717.78 -317.9 8.70 1.15 0.35 4.10 4.21% 12.34% 29.07%
Best Buy Co, Inc. BBY 9,285.63 -115 7.86 1.59 0.19 3.12 35.71% 16.40% 24.33%
RadioShack Corp RSH 1,160.12 -1.3 9.01 1.45 0.26 3.64 83.35% n/a 42.83%
Bic Camera, Inc. 3048 982.01 564.4 7.79 1.02 0.21 n/a 98.32% n/a 24.68%
GEO Holdings Corp 2681 655.64 164.52 4.90 1.04 0.26 2.62 74.72% 13.18% 44.11%
hhgregg, Inc. HGG 361.15 31.79 8.19 1.24 0.18 3.50 11.68% n/a 28.56%
Village Vanguard Co Ltd 2769 160.62 37.67 5.52 0.59 0.30 3.02 34.97% 8.92% 42.33%
Game Group PLC GMG 159.88 149.54 n/a 0.35 0.12 3.78 47.22% n/a 24.33%

10. CFA Institute Research Challenge February 7, 2012
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Figure 29: Investment Risks
Source: GameStop
Figure 30: Projected Currency
Fluctuations
Source: EIU
Source: Bloomberg
Figure 31: GameStop’s ROIC
and ROE Performance
Nintendo, Sony, Activision, and Electronic Arts. Because the Company procures most of its inventory from
such few suppliers, GameStop may not be able to obtain favorable terms on negotiated contracts, which can
negatively impact the firm’s financial position.
Further, because the Company has operations in 17 countries across the world, its vendors also carry the
burden of the poor economic conditions that prevail. If the vendors are unable to provide marketing support,
it could have a negative impact on GameStop’s earnings.
Intensified Competition in the Gaming Industry: the industry is flooded with numerous competitors which has
intensified the rivalry among all players in gaming industry space. As pressure intensifies, GameStop may
reduce prices and increase capital spending, which will reduce margins and profitability. Further, trade-in
programs for other players are expected to expand and gain on GameStop’s program.
Necessity to Effectively Manage Stores: with widespread operations, effective store management becomes
critical. If the Company fails to manage stores well, it can adversely affect its sales and profitability. Further,
if the Company is unable to renew leases for stores on competitive terms, its cost structure is bound to
increase. Also, the Company’s success depends upon its continued ability to attract, motivate, and retain
talented human capital. Failure to retain key personnel and attract talent can potentially damage the smooth
business operations.
Strategic Risks
Industry Shift & Technological changes: the electronic game industry is witnessing a major shift from
hardware consoles to sophisticated software platforms and digital online gaming. Although the Company has
made a few acquisitions to enter the digital space, it is highly uncertain that it will be able to keep pace with
the changing trends of this highly competitive industry. Failure to adapt to technological advances may
render GameStop’s existing business model obsolete.
Further, with the changing industry trends, the Company is exposed to lose out on the used video game
markets. As more and more developers publish downloadable content and charge a fee, GameStop’s used
video game revenues are bound to diminish. As the exchange of used games drive revenues for new gaming
products (through store credits), the Company may also lose out on sales of new video games.
Acquisitions, Investments, and Competing in a New Market: GameStop has made and may make investments
and strategic acquisitions to expand into the digital, social media, browser, and mobile gaming market space.
The Company acknowledges that it may have to liquidate a portion of its ownership or raise debt-capital to
finance future acquisitions. If GameStop is unable to successfully integrate its acquisitions and capitalize on
its investments, it will be unable to adapt to the shift in the industry towards digital media.
Further, as the industry evolves to the digital media, mobile, and browser gaming spaces, the Company has
had to alter its strategy to meet consumer expectations. Although the Company has seen success in its recent
android venture, there is no guarantee that future strategies and their execution would be as successful. Also,
the company aspires to close stores that are not meeting its profitability hurdles. If the Company is unable to
transfer customers to nearby stores, the sales may drop substantially, leaving the company in a poor financial
condition.
Financial Risks
Foreign Currency Risk: the Company uses forward exchange contracts, foreign currency options and
currency swaps to mitigate currency risks related to intercompany loans and foreign currency assets and
liabilities. The foreign currency contracts are not hedges and therefore the changes in the fair value is
recognized in the earnings. In FY 2010, the Company recognized a loss of $7.1 million due to these
derivative instruments. Although we encourage the use of financial derivatives to manage currency risk, the
fluctuations caused in their fair value can potentially impact GameStop’s bottom line.
Potential changes in Global Tax Rate: because the Company operates across several countries, it is subject to
different tax rates and varied tax-accounting policies. If these rates were to change in an unfavorable
direction, GameStop may have to bear a significant financial impact.
Management Background & Corporate Governance
We firmly believe GameStop’s biggest intangible resource is its vast and talented human capital. Please refer
Appendix 20 for a snapshot of some of the members of GameStop’s management team.
Corporate Social Responsibility
GameStop is a socially responsible organization. The Company strongly believes that the communities it
serves forms an integral part of its organizational culture. The firm chooses to support organizations whose
goals align with the Company’s desire to effectively serve the community. GameStop and it’s non-profit
partner, Make-A-Wish foundation, work together to provide shopping sprees to children across the US. The
process is well established as the children, their families, and their wish granters visit the nearest GameStop
stores to purchase gaming inventory. GameStop takes pride in supporting the foundation and makes
continuous efforts to makes the children’s dreams come true!

11. CFA Institute Research Challenge February 7, 2012
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Appendices
Appendix 1. WACC Calculations
Source: Indicated above
Appendix 2. DCF Calculations
Source: CFA University Team
Item Value Description, Sources
Risk-free rate 2.00% Average YTM of 10-year US government bonds for January 2012, source: Federal Reserve
Equity beta 1.024 GME's monthly returns for past 5 years were regressed on S&P 500, source: Bloomberg
Market risk premium 6.72% Arithmetic average of MRP between 1926-2010, source: Ibbotson
Size premium 1.20% Mid-cap company, source: Ibbotson
Cost of equity 10.08% Risk-free rate + adjusted beta*Market risk premium + Specific risk premium
Cost of debt
Pre-tax cost of debt 5.50% Determined using ADamodaran credit rating calculation sheet combined with our assumptions
Tax rate 34.30% Average historical tax rate
After-tax cost of debt 3.61% Pre-tax cost of debt * (1-tax rate)
Weighted average cost of capital ("WACC")
Share of Equity 100.00% Based on management guidance
Share of Debt - 1-Share of Equity
WACC 10.08% % Equity * CAPM + % Debt * After-tax cost of debt
WACC Calculations
Capital Asset Pricing Model ("CAPM")
DCF 2010H 1-3Q 2011H 4Q 2011E 2011E 2012F 2013F 2014F 2015F TV
Sales USD $9,473,700.00 $5,971,900.00 $3,605,812.91 $9,577,712.91 $9,829,232.08 $10,119,922.09 $10,457,970.44 $10,856,269.63
COGS USD 6,936,100.00 4,233,900.00 2,761,661.51 6,995,561.51 7,196,718.00 7,426,504.82 7,692,098.71 8,004,327.60
EBIT USD 662,600.00 267,400.00 402,375.71 669,775.71 601,082.35 533,398.01 464,246.64 461,171.91
EBIT % 6.99% 4.48% 11.16% 6.99% 6.12% 5.27% 4.44% 4.25%
EBIAT USD 433,771.61 176,333.65 264,378.66 440,072.29 394,937.71 350,466.11 305,030.60 303,010.36 310,585.62
Corrections USD
CAPEX USD -240,100.00 -162,800.00 -114,800.00 -277,600.00 -282,603.75 -289,103.64 -296,331.23 -304,035.84 -380,791.57
DD&A USD 176,800.00 142,100.00 51,076.22 193,176.22 235,631.03 277,713.75 322,977.08 371,503.97 380,791.57
Delta NWC USD -123,200.00 -58,900.00 -84,312.26 -143,212.26 -71,309.22 -75,274.20 -100,555.41 -66,305.81 -67,963.46
FCFF USD 247,271.61 96,733.65 116,342.61 212,436.25 276,655.77 263,802.01 231,121.04 304,172.68 242,622.16
Discount rate % 10.08% 10.08% 10.08% 10.08% 10.08% 10.08%
Period years 0.13 1.13 2.13 3.13 4.13
Factor for the whole period 0.99 0.90 0.82 0.74 0.67
Discounted FCFF USD 114,954.14 248,320.22 215,098.30 171,192.56 204,669.03
PV of TV USD 2,153,376
Terminal Growth rate % 2.5%
Enterprise Value USD 3,107,610
EBITDA multiple 4.03
Sales multiple 0.32
Net Debt USD (317,900)
Cash, equivalents, S-T inv USD 442,600
Total Debt USD 124,700
Equity Value USD 3,425,510
# of shares 136,424
Price Per Share USD 25.11$

12. CFA Institute Research Challenge February 7, 2012
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Trading Peers Analysis, As Of Latest Historical Filling Period
Company M Cap Net debt TEV Revenue, LTM EBITDA, LTM Net income, LTM TEV/Revenue TEV/EBITDA P/E
Best Buy Co, Inc. 9285.63 -115 9170.63 50642 3081 1118 0.18 2.98 8.31
RadioShack Corp 1160.12 -1.3 1158.82 4404.8 318.6 117.3 0.26 3.64 9.89
Bic Camera, Inc. 982.01 564.4 1546.41 7504.08 290.12 110.91 0.21 5.33 8.85
GEO Holdings Corp 655.64 164.52 820.16 3187.8 311.8 126.2 0.26 2.63 5.20
hhgregg, Inc. 361.15 31.79 392.94 2210.81 112.19 46.81 0.18 3.50 7.72
Village Vanguard Co Ltd 160.62 37.67 198.29 497.79 50.53 22.27 0.40 3.92 7.21
Game Group PLC 159.88 149.54 309.42 2491.59 79.49 n/a 0.12 3.89 n/a
Min 0.12 2.63 5.20
Max 0.40 5.33 9.89
Average 0.23 3.70 7.86
Median 0.21 3.64 8.01
Standard deviation 0.09 0.86 1.60
Appendix 3. Trading Peers Trailing Multipes Analysis, As Of Latest Filling Period
Source: Bloomberg
Appendix 4. Target Price Determination On Basis Of Trading Peers Trailing Multipes Analysis
Source: GameStop, CFA University Team
Appendix 5. Trading Peers Forward Multiples Analysis
Source: Bloomberg
Trading Peers Forward Analysis
TEV/Revenue TEV/EBITDA P/E TEV/Revenue TEV/EBITDA P/E
Best Buy Co, Inc. 0.16 2.64 6.83 0.16 2.66 6.20
RadioShack Corp 0.22 3.17 8.40 0.21 2.90 7.02
Bic Camera, Inc. n/a n/a n/a n/a n/a n/a
GEO Holdings Corp n/a n/a n/a n/a n/a n/a
hhgregg, Inc. 0.22 4.64 10.40 0.20 4.22 9.35
Village Vanguard Co Ltd 0.28 2.77 4.66 0.26 n/a 4.13
Game Group PLC 0.08 5.18 n/a 0.08 3.33 12.79
Min 0.08 2.64 4.66 0.08 2.66 4.13
Max 0.28 5.18 10.40 0.26 4.22 12.79
Average 0.19 3.68 7.57 0.18 3.28 7.90
Median 0.22 3.17 7.62 0.20 3.12 7.02
Standard deviation 0.08 1.16 2.43 0.07 0.69 3.31
Company
FY2011 FY2012
Trailing Comparable Peers Valuation
GME Financial
data
Revenue Average
Multiple
Revenue Median
Multiple
EBITDA Average
Multiple
EBITDA Median
Multiple
P/E Average
Multiple
P/E Median
Multiple
TEV min TEV max Net debt P min P max
$ 9,664,658 0.23 0.21 1,991,653.04 2,219,816.74 -317,900.00 16.93$ 18.60$
$ 771,554 3.70 3.64 2,806,315.78 2,854,044.68 -317,900.00 22.90$ 23.25$
$ 402,977 7.86 8.01 3,168,255.90 3,228,007.81 0.00 23.22$ 23.66$

13. CFA Institute Research Challenge February 7, 2012
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Appendix 6. Target Price Determination On Basis Of Trading Peers Forward Multipes Analysis
Source: GameStop, CFA University Team
Appendix 7. Comparable Transactions Analysis and Acquired Companies Description
Source: Bloomberg, CFA University Team
Acquired Companies Description
Source: Bloomberg
Appendix 8. Target Price Determination On Basis Of Comparable Tramsactions Multipes Analysis
Source: GameStop, CFA University Team
Target Companies Description
Company Description
Culture Convenience Club Co. Ltd.
Operations included sales and rental of videos, DVDs, CDs, books, game software and other entertainment content
TSUTAYA stores. Also operated online information distribution service
Soft Map Co. Ltd.
Operated retail stores specialized in computers, software, digital products and related supplies based in Tokyo
metropolitan area. Also traded second-hand products and an online business.
Warehouse Co. Ltd.
Provided leisure related services. Rental division operated 24-hour DVD and CD rental stores in Tokyo, Saitama and Chiba
Prefectures. Amusement Facilities division operated 12 game centers, karaoke facilities, and pool halls
Sumiya Co. Ltd. Operations included retail of A V software and consumer electronics. Also involved in selling furniture
Comparable Transactions Analysis
Date of
Acquisition Target Acquirer Deal Value
Announced
premium
Target's Net
Debt
TEV, Minority
Perspective
Target LTM
Revenue
Target LTM
EBITDA
Target LTM
Net income TEV/Revenue TEV/EBITDA P/E
2/3/2011
Culture Convenience
Club Co Ltd MM Holdings Co Ltd 1250.8 27.9% 383.412 1,285.24 1989.13 232.63 61.14 0.65 5.52 14.75
10/14/2009 Sofmap Co Ltd Bic Camera Inc 60.38 -6.54% 38.6688 103.00 1018.71 8.09 0.30 0.10 excl 215.14
5/14/2010 Warehouse Co Ltd Geo Holdings Corp 57.39 18.6% 25.8476 72.56 107.072 21.05 -18.21 0.68 3.45 n/a
11/5/2009 Sumiya Co Ltd
Culture Convenience Club
Co Ltd 5.16 6.58% 28.5277 33.35 103.335 -6.05 -18.45 0.32 n/a n/a
Min 0.10 3.45 Excl
Max 0.68 5.52 Excl
Average 0.44 4.49 Excl
Median 0.48 4.49 Excl
Standard
deviation 0.28 1.47 Excl
Comparable Transactions Valuation
GME Financial
data
Revenue average
multiple
Revenue median
multiple
EBITDA average
multiple
EBITDA median
multiple
P/E average
multiple
P/E median
multiple
TEV min TEV max Net debt P min P max
$ 9,664,658 0.44 0.48 4,222,632.93 4,681,802.74 -317,900.00 33.28$ 36.65$
$ 771,554 4.49 4.49 3,461,174.19 3,461,174.19 -317,900.00 27.70$ 27.70$
$ 402,977 Excluded Excluded Excluded Excluded Excluded Excluded Excluded
Forward Comparable Peers Valuation, FY2011
GME Financial
data
Revenue average
multiple
Revenue median
multiple
EBITDA average
multiple
EBITDA median
multiple
P/E average
multiple
P/E median
multiple
TEV min TEV max Net debt P min P max
$ 9,577,713 0.19 0.22 1,838,920.88 2,107,096.84 -317,900.00 15.81$ 17.78$
$ 862,952 3.68 3.17 2,735,557.63 3,175,663.11 -317,900.00 22.38$ 25.61$
$ 428,377 7.57 7.62 3,243,884.11 3,262,090.13 0.00 23.78$ 23.91$
Forward Comparable Peers Valuation, FY2012
GME Financial
data
Revenue average
multiple
Revenue median
multiple
EBITDA average
multiple
EBITDA median
multiple
P/E average
multiple
P/E median
multiple
TEV min TEV max Net debt P min P max
$ 9,829,232 0.18 0.20 1,788,920.24 1,965,846.42 -317,900.00 15.44$ 16.74$
$ 836,713 3.28 3.12 2,606,362.18 2,742,328.11 -317,900.00 21.44$ 22.43$
$ 394,938 7.90 7.02 2,772,462.74 3,119,218.05 0.00 20.32$ 22.86$

14. CFA Institute Research Challenge February 7, 2012
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Appendix 9. Key Risks To Price Target
Source: CFA University Team
Appendix 10. GameStop’s Projected Market Shares On Different Markets According to Three Scenarios
Risk Factors Description
Risk
Probability
Potential Impact
on Price Target*
Used video products market
conjuncture
Used video products business is one of the key segments of GameStop.
Therefore, its dynamics significantly influence the valuation. If used video
game market has better than expected dynamics, GameStop price will be
higher than our estimates and vice-versa.
High
Digital sales growth
As the gaming industry experiences a shift to digital realm, it is crucial for
GameStop to adapt to this change. The management is optimistic
concerning digital sales growth rate and we incorporated this into our
valuation to a reasonable extent. If used digital sales market grows better-
than expected, GameStop price will be higher than our estimates and vice-
versa.
High
Cyclicity of target industry
The retail undustry in general and specialty retail in particular are
extremely vulnerable to cyclical sales and profitability fluctuations,
especially during holiday seasons. The cyclicity is oftentimes hard to
analyze and predict in monetary terms.
Average
Lack of potentially attractive
acquisition targets or
inability to succesfully
integrate acquisitions into
GameStop's business model
We projected high level of acquisitions and capital expenditures to sustain
GameStop's expansion into digital business to support projected digital
sales and market share growth. The inability to actually acquire attractive
companies or succesfully integrate them into the business model would
result in GameStop's share price decline
Average

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16. CFA Institute Research Challenge February 7, 2012
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Source: GameStop, CFA University Team
Appendix 11. GameStop’s Projected Gross Margins According to Base Scenarios
Source: GameStop, CFA University Team
1.32%
1.02%
8.65%
9.29%
4.78%
4.46%
12.04%
13.50%
11.50%
10.00%
0.50%
2.50%
4.50%
6.50%
8.50%
10.50%
12.50%
2010H 2011E 2012F 2013F 2014F 2015F
Gross Profit Margins Projected Dynamics
New video game hardware New video game software
Other Used video products, Best-case
Used video products, Normal-case Used video products, Worst-case

17. CFA Institute Research Challenge February 7, 2012
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Appendix 12. GameStop’s DCF “Football Field”
Source: CFA University Team
9.00 19.00 29.00 39.00 49.00 59.00 69.00 79.00
Best
Normal
Worst
Lower Range:
$18.61-$18.94
~~ $19
Upper Range:
$30.68-$42.71
~~ $35
GAMESTOP's
DCF
FOOTBALL
FIELD

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Appendix 13. Vertical and Horizontal Historical Balance Sheet Analysis
Source: GameStop, CFA University Team
1.1. Vertical and horizontal analysis
Balance Sheet
Assets 2009H 2010H
1-3Q
2011H 2008-2009H 2009-2010H
1-3Q
2010H - 1-
3Q 2011H
Current assets
Cash and near cash items 18.27% 14.04% 8.15% 56.61% -21.49% 144.45%
Accounts and notes receivables 1.29% 1.29% 1.07% -3.00% 2.34% -1.27%
Merchandise inventories 21.26% 24.83% 32.73% -2.06% 19.35% -8.45%
Deferred income taxes 0.43% 0.57% 0.56% -10.23% 35.85% 39.40%
Prepaids 1.20% 1.49% 2.08% 0.51% 27.44% 37.24%
Other CA 0.48% 0.33% 0.26% 53.79% -30.38% 1.30%
Total Current Assets 42.93% 42.55% 44.84% 17.01% 1.29% 5.92%
Long-term assets
Goodwill 39.28% 39.42% 37.92% 4.53% 2.56% 2.78%
Gross PP&E 25.14% 28.02% 27.69% 14.85% 13.88% 9.41%
Accumulated DD&A 13.36% 15.90% 16.59% 23.55% 21.67% 17.24%
Net PP&E 11.79% 12.12% 11.10% 6.36% 5.07% -0.52%
Other L-T Assets 6.00% 5.90% 6.14% 4.98% 0.54% 9.53%
Total Long-term assets 57.07% 57.45% 55.16% 4.95% 2.86% 2.80%
Total assets 100.00% 100.00% 100.00% 9.81% 2.19% 4.17%
Liabilities and Shareholders' Equity
Current liabilities
Accounts payables 19.41% 20.30% 26.95% -8.23% 6.90% -3.32%
Accrued liabilities 12.76% 12.97% 13.07% 22.80% 3.94% 25.79%
Taxes payable 1.25% 1.24% 0.00% n/a 1.29% -100.00%
Current portion of L-T debt 0.00% 0.00% 2.30% n/a n/a 100.00%
Short-term borrowings 0.00% 0.00% 0.00% n/a n/a n/a
Total Current Liabilities 33.41% 34.52% 42.31% 5.95% 5.56% 10.58%
Long-term liabilities n/a n/a n/a
Long-term borrowings 9.03% 4.92% 0.00% -18.03% -44.33% -100.00%
Deferred taxes 0.51% 1.48% 1.23% n/a 193.73% 273.28%
Other L-T liabilities 2.09% 1.90% 1.94% -0.66% -7.32% 5.20%
Total L-T Liabilities 11.64% 8.30% 3.17% -11.32% -27.14% -53.04%
Total Liabilities 45.05% 42.81% 45.49% 0.88% -2.88% 1.03%
Equity
Total preferred equity 0.00% 0.00% 0.00% n/a n/a n/a
Class A CS 0.00% 0.00% 0.00% 21.95% -50.00% -99.99%
Additional paid-in-capital 24.43% 18.34% 14.03% -7.42% -23.26% 354.59%
Accum other comprh inc 2.31% 3.21% 4.23% -503.50% 41.67% -85.33%
Retained earnings 28.21% 35.66% 36.28% 36.97% 29.19% -28.86%
Noncontrolling interest 0.00% -0.03% -0.03% n/a 600.00% 14.12%
Total equity 54.95% 57.19% 54.51% 18.41% 6.35% 6.94%
Total liabilities and Equity 100.00% 100.00% 100.00% 9.81% 2.19% 4.17%
Vertical analysis Horizontal analysis

19. CFA Institute Research Challenge February 7, 2012
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Appendix 14. Vertical and Horizontal Historical Income Statement Analysis
Source: GameStop, CFA University Team
Appendix 15. Altman Z-Score Calculations
Source: GameStop, CFA University Team
2.1. Vertical and horizontal analysis
Income statement
2009H 2010H
1-3Q
2011H 2008-2009H 2009-2010H
1-3Q
2010H - 1-
3Q 2011H
Sales 100.00% 100.00% 100.00% 3.09% 4.36% 3.30%
Cost of Sales 73.18% 73.21% 70.93% 1.65% 4.41% 2.14%
Gross profit 26.82% 26.79% 29.07% 7.25% 4.23% 6.27%
SG&A 18.01% 17.95% 22.25% 12.76% 3.99% 9.10%
DD&A 1.79% 1.84% 2.35% 12.13% 7.44% 8.49%
Operating earnings 7.02% 6.99% 4.48% -5.65% 4.02% -6.78%
Interest income -0.02% -0.02% -0.01% -81.07% -18.18% -48.22%
Interest expense 0.50% 0.39% 0.31% -10.02% -18.50% -39.61%
Debt extinguishment expense 0.06% 0.06% 0.01% 127.37% 13.21% -89.94%
EBT 6.48% 6.56% 4.17% -7.17% 5.59% -1.04%
Income taxes 2.34% 2.27% 1.42% -9.70% 0.85% 2.63%
Consolidated NI 4.14% 4.29% 2.75% -5.67% 8.28% -2.83%
Net loss attributable to noncontrolling interests 0.02% 0.01% 0.02% n/a -25.00% -19.61%
Consolidated net income attributable to GameStop 4.16% 4.31% 2.77% -5.27% 8.14% -2.95%
Basic net income per common share -6.15% 17.47% 4.46%
Diluted net income per common share -5.46% 17.78% 5.45%
Vertical Analysis Horizontal Analysis
Altman Z-score calculation
In thousands 2007 2008 2009 2010 3Q2011
Current Assets 1,794,717 1,818,041 2,127,300 2,154,800 2,436,100
Current Liabilities 1,260,557 1,562,711 1,655,700 1,747,800 2,298,800
Total Assets 3,775,891 4,512,590 4,955,300 5,063,800 5,432,600
Retained Earnings 288,291 398,282 377,300 408,000 403,021
EBIT 501,421 675,119 637,000 662,600 643,148
Market Value of Equity 8,499,357 4,154,887 3,319,383 3,244,780 3,717,780
BV of Total Liabilities 1,913,445 2,212,909 2,232,300 2,167,900 2,471,100
Sales 7,093,962 8,805,897 9,078,000 9,473,700 9,664,658
Altman Z-Score 5.26 3.76 3.37 3.41 3.21
For references:
Safe Zone Z Score > 2.99
Grey Zone 1.80 < Z Score < 2.99
Distress Zone Z score < 1.80

20. CFA Institute Research Challenge February 7, 2012
20
Appendix 16. GameStop’s SWOT Analysis
Source: CFA University Team
Appendix 17. GameStop’s Main Products Description
Source: GameStop
GME: SWOT Analysis
Strengths Weaknesses
Strong Client Base reflective of Market Penetration Reliance on limited number of
Recent Retirement of Debt enhances Balance Sheet
Strength
vendors
Strong FCFF generation ability
Absense of geographical diversification
in Sales
Opportunities Threats
Poised for growth in booming Android Gaming
Market
Competition and Industry shift may
diminish "trade-in" profitability
Potential to expand in growing Digital
Distribution Market
Inability to gain significant digital
Online retail market growth
market share from proven leaders and
offset diminishing physical sales
Potential to successfully combine physical and
online retail businesses through acquisitions
S. No. Product Category Description
1 New Video Game Software
•Procured from manufacturers such as Sony Entertainment, Nintendo, Microsoft & third party manufacturers such as
Electronic Arts and Activision
•GME carries more than 1000 SKUs across numerous genres
2 Used Video Products •GME is the largest retailer of Used Video Products
•Offers over 3000 SKUs
•GME encourages the exchange of used products for new ones by providing store credits
•Includes Used Software, iDevices etc
3 Video Game Hardware Platforms •GME provides technology-driven hardware platforms
•Platforms include Sony PlayStation 2 and 3 and PSP, Microsoft Xbox 360 and Kinect, and the Nintendo DSi, DSi XL
and Wii
4 Video Game Accessories •GME offers more then 300 SKUs of accessories
•Accessories include PC entertainment software, digital inventory, Game Informer magazine etc

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Appendix 18. GameStop’s Acquisitions’ Description
Source: GameStop
Appendix 19. GameStop’s Peers Description
Source: Bloomberg, Yahoo!Finance
Name of Company Acquired Deal Date Deal value ( $M) Business Description
Impulse, Inc. (UnitedStates) 31-Mar-11 N/A Operates online platforms for digital game distribution
Spawn Labs, Inc. (formerly
Virsion) (UnitedStates)
31-Mar-11 N/A
Develops platforms that provide remote, real-time, interactive access
to products, content, and experiences
Kongregate, Inc.(UnitedStates) 27-Jul-10 N/A
Provides online games for players and developers. Offers action,
multiplayer, shooter, adventure and RPG,sports and racing, strategy
and defense, puzzle, music, and tutorials games, as well as online
advertising services.
Jolt Online Gaming (United
States)
4-Nov-09 N/A
Based in Europe, with servers across the US, the Company supplies
rentable servers for online gamings
Micromania S.A.S. (France) 1-Oct-08 686 Popular retailer of computer games and playstations.
The Gamesman (NewZealand) 2-Jul-08 N/A Operates gaming retail stores and online gaming retail stores.
Free RecordShopNorway
(Norway)
31-Mar-08 N/A
Pioneer in the distribution and sale of home entertainment products
in northwest Europe
Blockbuster Inc. - Rhino Vedio
Games Chain (UnitedStates)
5-Jan-07 N/A Offers DVDs, and video games for rental and sale
Peer Companies Description
Company Description
Best buy Co, Inc.
Best Buy Co, Inc. is a specialty retailer which operates in the United States, Europe, Canada, and China. Its main products
include consumer electronics, home and office products, entertainment products, appliances, new and used video game
hardwre and software, etc. Some of its online retail operations are under the names “Best Buy”, “Best Buy Mobile”, “The
Carphone Warehouse”, and “Five Star” . Its stores offer video, audio products, mobile electronics, car stereo, and satellite
radio products, as well as, entertainment software products and appliances. Furthermore, the company delivers service
contracts and warranties, product repair, and installation services for home theaters
RadioShack Corp.
RadioShack Corporation sells consumer electronic goods and services, including postpaid and prepaid wireless handsets,
communication and home entertainment deivces, media storage, home audio and video end-products, digital cameras, general
and special purpose batteries and battery chargers, and wires and cables. Moreover, it offers prepaid consumer service
plans in its service platform to third-parties. The company operates 4,467 company-operated retail stores in the United
States and 1,304 kiosks located in Target and Sam’s Club stores. It also sells its products through radioshack.com
Bic Camera, Inc.
Bic Camera, Inc. is a retailer of audio and visual products, information communication equipment with core products such
as cameras, televisions, recorders, PCs, as well as video game software and hardware. Additionally, the company is engaged
in electronic commerce activities through biccamera.com and it also participates in the provision of satellite and cable TV
broadcasting services, installation and repair services for its goods. The company operates in Japan
GEO Holdings Corp.
Geo Holdings mainly sells audio, video and entertainment software and hardware. It also provides rental and recycling
services. Further, the company sells products and provides services online. Geo Holdings has also an amusement segment,
which operates cinemas, game and karaoke facilities
hhgregg, Inc.
hhgregg, Inc. is a retailer of consumer electronics, home appliances and related products. The company operates around 180
stores throughout the USA. It offers a selection of video products, software, hardware, as well as appliances, including
refrigerators, cooking ranges, dishwashers, freezers, washers and dryers
Village Vanguard Co. Ltd
Village Vanguard Co. Ltd. is a retail company which sells video and audio products, books, along with goods for living and
decoration. The company operates in Japan and Hong Kong.
Game Group PLC
The Game Group PLC, headquartered in United Kingdom, is a specialist personal computer and video games retailer, which
uses retail outlets and eCommerce sites as trading methods. It offers a range of software and peripherals, including its own
brand accessories. It provides services in the United Kingdom and the Republic of Ireland (639 stores), and five
international territories, as well as through websites game.co.uk, gameplay.co.uk and gamestation.co.uk.

22. CFA Institute Research Challenge February 7, 2012
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Appendix 20. GameStop’s Key Management Description
Source: GameStop
S. No. Name Designation Association with GameStop
1 Daniel A. DeMatteo Executive Chairman & Director - Served as GameStop's CEO from 2008 to 2010
- Served as Vice Chairman and COO from 2005 to 2008
- Served as President and COO for GameStop & predecessor
companies from 1996 to 2005
2 R. Richard Fontaine Chairman International & Director - Served as Executive Chairman of the Board from 2008 until 2010
- Served as Chairman of the Board and CEO at GameStop or its
predecessor companies from 2002 until 2008
3 Michael N. Rosen Director - Serves as a Director since 2001
- Served as the Secretary at the Company or its predecessor
companies from 1999 until 200
4 Stephanie M. Shern Director - Serves as a Director since 2002
5 Edward A.Volkwein Director - Serves as a Director since 2002
6 Gerald R. Szczepanski Director - Serves as a Director since 2002
7 Stanley Steinberg Director - Serves as a Director since 2005
8 J. Paul Raines Chief Executive Officer - Serves as the CEO since 2010
- Joined GameStop in 2008 as a COO
9 Robert A. Lloyd Chief Financial Officer - Serves as the CFO since 2010
- Served as the Interim CFO from February 2010 to June 2010
- Served as the Chief Accounting Officer from 2005 to 2010
- Served as the Vice President of Finance at GameStop or
its predecessor companies from 2000 to 2005
- Served as the Controller of GameStop's predecessor
companies from 1996 to 2000

23. CFA Institute Research Challenge February 7, 2012
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Appendix 21. Projected Financial Statements: Balance Sheet, Income Statement & Cash Flow Statement
UNITS 2010H 1-3Q 2011H 4Q 2011E 2011E 2012F 2013F 2014F 2015F
Income statement
Sales USD 9,473,700$ 5,971,900$ 3,605,813$ 9,577,713$ 9,829,232$ 10,119,922$ 10,457,970$ 10,856,270$
Cost of Sales USD 6,936,100 4,233,900 2,761,662 6,995,562 7,196,718 7,426,505 7,692,099 8,004,328
Gross profit USD 2,537,600 1,738,000 844,151 2,582,151 2,632,514 2,693,417 2,765,872 2,851,942
SG&A USD 1,700,300 1,328,500 390,699 1,719,199 1,795,801 1,882,306 1,978,648 2,019,266
DD&A USD 174,700 142,100 51,076 193,176 235,631 277,714 322,977 371,504
Operating earnings USD 662,600 267,400 402,376 669,776 601,082 533,398 464,247 461,172
Interest income USD (1,800) (700) 0 (700) 0 0 0 0
Interest expense USD 37,000 18,500 - 18,500 - - - -
Debt extinguishment expense USD 6,000 600 - 600 - - - -
EBT USD 621,400 249,000 402,376 651,376 601,082 533,398 464,247 461,172
Income taxes USD 214,600 84,800 138,799 223,599 206,145 182,932 159,216 158,162
ConsolidatedNI USD 406,800$ 164,200$ 263,577$ 427,777$ 394,938$ 350,466$ 305,031$ 303,010$
Net loss attributable to noncontrolling interests USD 1,200 1,000 - 1,000 - - - -
Consolidatednet income attributable to GameStop USD 408,000 165,200 263,577 428,777 394,938 350,466 305,031 303,010
Basic net income per common share USD 2.69$ 1.17$ 1.92$ 3.04$ 2.93$ 2.67$ 2.38$ 2.43$
Diluted net income per common share USD 2.65$ 1.16$ 1.92$ 3.04$ 2.93$ 2.67$ 2.38$ 2.43$
Weighted average shares of common stock-basic USD 151,600 140,800 137,390 141,190 134,739 131,455 128,171 124,888
Weighted average shares of common stock-diluted USD 154,000 141,900 137,390 141,190 134,739 131,455 128,171 124,888
UNITS 2010H 1-3Q 2011H 4Q 2011E 2011E 2012F 2013F 2014F 2015F
Balance Sheet
Assets
Current assets
Cash and near cash items 710,800$ 442,600$ 394,822$ 394,822$ 591,601$ 775,586$ 927,184$ 1,152,027$
Accounts and notes receivables USD 65,500 58,100 65,331 65,331 67,047 69,030 71,336 74,052
Merchandise inventories USD 1,257,500 1,778,300 1,239,020 1,239,020 1,350,326 1,471,537 1,625,273 1,754,373
Deferred income taxes USD 28,800 30,400 30,400 30,400 30,400 30,400 30,400 30,400
Prepaids USD 75,700 112,800 80,431 80,431 82,281 84,174 86,278 88,521
Other CA USD 16,500 13,900 17,531 17,531 17,934 18,347 18,806 19,295
Total Current Assets USD 2,154,800 2,436,100 1,827,536 1,827,536 2,139,590 2,449,073 2,759,276 3,118,668
Long-term assets
Goodwill USD 1,996,300 2,060,300 2,092,745 2,092,745 2,141,657 2,191,694 2,242,982 2,295,604
Gross PP&E USD 1,419,000 1,504,400 1,575,196 1,575,196 1,760,474 1,945,433 2,130,684 2,316,613
Accumulated DD&A USD 805,200 901,500 941,017 941,017 1,128,235 1,351,841 1,615,026 1,921,045
Net PP&E USD 613,800 602,900 634,179 634,179 632,239 593,592 515,658 395,568
Other L-T Assets USD 298,900 333,300 333,300 333,300 333,300 333,300 333,300 333,300
Total Long-term assets USD 2,909,000 2,996,500 3,060,224 3,060,224 3,107,196 3,118,586 3,091,941 3,024,472
Total assets USD 5,063,800$ 5,432,600$ 4,887,759$ 4,887,759$ 5,246,787$ 5,567,659$ 5,851,217$ 6,143,141$
Liabilities andShareholders' Equity
Current liabilities
Accounts payables USD 1,028,100$ 1,464,300$ 1,025,129$ 1,025,129$ 1,054,606$ 1,088,279$ 1,127,199$ 1,172,953$
Accrued liabilities USD 657,000 709,800 503,873 503,873 518,361 534,912 554,042 576,531
Taxes payable USD 62,700 - - - - - - -
Current portion of L-T debt USD - 124,700 - - - - - -
Short-termborrowings USD - - - - - - - -
Total Current Liabilities USD 1747800 2298800 1,529,001 1,529,001 1,572,967 1,623,191 1,681,241 1,749,484
Long-term liabilities USD
Long-termborrowings USD 249,000 - - - - - - -
Deferred taxes USD 74,900 67,000 67,000 67,000 67,000 67,000 67,000 67,000
Other L-T liabilities USD 96,200 105,300 111,881 111,881 114,455 117,087 120,014 123,135
Total L-T Liabilities USD 420,100 172,300 178,881 178,881 181,455 184,087 187,014 190,135
Equity
Total preferred equity USD - - - - - - - -
Class A CS USD 100.00 100.00 100.00 100.00 99.99 99.99 99.99 99.98
Additional paid-in-capital USD 928,900 762,000 716,800 716,800 634,350 551,900 469,450 387,000
Accumother comprh inc USD 162,500 230,000 230,000 230,000 230,000 230,000 230,000 230,000
Retained earnings USD 1,805,800 1,971,000 2,234,577 2,234,577 2,629,515 2,979,981 3,285,011 3,588,022
Noncontrolling interest USD (1,400) (1,600) (1,600) (1,600) (1,600) (1,600) (1,600) (1,600)
Total equity USD 2,895,900 2,961,500 3,179,877 3,179,877 3,492,365 3,760,381 3,982,961 4,203,522
Total liabilities andEquity USD 5,063,800$ 5,432,600$ 4,887,759$ 4,887,759$ 5,246,787$ 5,567,659$ 5,851,217$ 6,143,141$

24. CFA Institute Research Challenge February 7, 2012
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Source: CFA University Team
UNITS 2010H 1-3Q 2011H 4Q 2011E 2011E 2012F 2013F 2014F 2015F
Cash Flowstatement
CF from operating activities
Consolidated net income USD 406,800$ 164,200$ 263,577$ 427,777$ 394,938$ 350,466$ 305,031$ 303,010$
Adjustments to reconcile net income to net cash flows
Depreciation and amortization (including amounts in cost of sales) USD 176,800 142,100 51,076 193,176 235,631 277,714 322,977 371,504
Provision for inventory reserves USD 27,500 0 - - - - - -
Amortization and retirement of deferred financing fees and issue discounts USD 5,000 2,300 - 2,300 - - - -
Stock-based compensation expense USD 29,600 14,500 - 14,500 - - - -
Deferred income taxes USD 38,200 (10,500) - (10,500) - - - -
Excess tax(benefits) expense realized fromexercise of stock-based awards USD (18,600) 200 - 200 - - - -
Loss on disposal of property and equipment USD 7,600 9,500 - 9,500 - - - -
Changes in other long-termliabilities USD (7,200) 1,300 6,581 7,881 2,573 2,632 2,927 3,120
Change in value of forexcontracts USD 0 0 0 0 0 0
Changes in operating assets and liabilities, net
Receivables, net USD 200 8,500 (7,231) 1,269 (1,716) (1,983) (2,306) (2,717)
Merchandise inventories USD (227,200) (502,400) 539,280 36880 (111,307) (121,210) (153,737) (129,100)
Prepaid expenses and other current assets USD (10,500) (7,800) 28,738 20938 (2,253) (2,305) (2,563) (2,732)
Prepaid income taxes and accrued income taxes payable USD 22,300 (88,000) - (88,000) - - - -
Accounts payable and accrued liabilities USD 140,700 477,100 (645,099) (167,999) 43,966 50,224 58,050 68,243
Net cash flows providedby operating activities USD 591,200 211,000 236,922 447,922 561,833 555,538 530,379 611,329
Cash flows from investing activities:
Purchase of property and equipment USD (197,600) (127,300) (42,700) (170,000) (173,910) (177,910) (182,358) (187,099)
Acquisitions, net of cash acquired USD (38,100) (27,900) (72,100) (100,000) (108,694) (111,194) (113,974) (116,937)
Other USD (4,400) (7,600) 0 (7,600) 0 0 0 0
Net cash flows usedin investing activities USD (240,100) (162,800) (114,800) (277,600) (282,604) (289,104) (296,331) (304,036)
Cash flows from financing activities:
Repurchase of notes payable USD (200,000) (125,000) (124,700) (249,700) 0 0 0 0
Purchase of treasury shares USD (381,200) (216,900) (45,200) (262,100) (82,450) (82,450) (82,450) (82,450)
Borrowings fromthe revolver USD 120,000 35,000 - 35,000 - - - -
Repayment of revolver borrowings USD (120,000) (35,000) 0 (35,000) 0 0 0 0
Borrowings for acquisition USD 0 0 0 0 0 0
Repayments of acquisition borrowings USD 0 0 0 0 0 0
Issuance of shares relating to stock options USD 10,800 14,500 - 14,500 - - - -
Excess taxbenefits (expense) realized fromexercise of stock-based awards USD 18,600 (200) 0 (200) - - - -
Other USD (3,800) - - - - - - -
Net cash flows providedby (usedin) financing activities USD (555,600) (327,600) (169,900) (497,500) (82,450) (82,450) (82,450) (82,450)
Exchange rate effect on cash and cash equivalents USD 9,900 11,200 - 11,200 - - - -
Net increase (decrease) in cash andcash equivalents USD (194,600) (268,200) (47,778) (315,978) 196,779 183,984 151,598 224,843
Cash and cash equivalents at beginning of period USD 905,400 710,800 442,600 710,800 394,822 591,601 775,586 927,184
Cash and cash equivalents at end of period USD 710,800 442,600 394,822 394,822 591,601 775,586 927,184 1,152,027

25. CFA Institute Research Challenge February 7, 2012
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Disclosures:
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report [holds/does not hold] a financial interest in the securities of this company.
The author(s), or a member of their household, of this report [knows/does not know] of the existence of any conflicts of interest that might bias the content or
publication of this report. [The conflict of interest is…]
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does [not] serves as an officer, director or advisory board member of the subject company.
Market making:
The author(s) does [not] act as a market maker in the subject company’s securities.
Ratings guide:
Banks rate companies as either a BUY, HOLD or SELL. A BUY rating is given when the security is expected to deliver absolute returns of 15% or greater
over the next twelve month period, and recommends that investors take a position above the security’s weight in the S&P 500, or any other relevant index.
A SELL rating is given when the security is expected to deliver negative returns over the next twelve months, while a HOLD rating implies flat returns over
the next twelve months.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but
the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used
as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of
an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with [Society Name], CFA
Institute or the CFA Institute Research Challenge with regard to this company’s stock.