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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information contained in our consolidated financial statements, including the notes thereto. Statements regarding future economic performance, management’s plans and objectives, and any statements concerning assumptions related to the foregoing contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute forward-looking statements. Certain factors, which may cause actual results to vary materially from these forward-looking statements, accompany such statements or appear elsewhere in this Form 10-K, including the factors disclosed under Part I, Item 1A, “Risk Factors.”

OVERVIEW

GameStop Corp. (“GameStop,” “we,” “us,” “our,” or the “Company”), a Delaware corporation established in 1996, is a leading specialty retailer offering games and entertainment products through its e-commerce properties and thousands of stores.

We operate our business in four geographic segments: United States, Canada, Australia and Europe. Our fiscal year is composed of the 52 or 53 weeks ending on the Saturday closest to the last day of January. Fiscal year 2020 consisted of the 52 weeks ended on January 30, 2021 ("fiscal 2020"). Fiscal year 2019 consisted of the 52 weeks ended on February 1, 2020 ("fiscal 2019") and fiscal year 2018 consisted of the 52 weeks ended on February 2, 2019 ("fiscal 2018"). The discussion and analysis of our results of operations refers to continuing operations unless otherwise noted.

Impact from COVID-19

At various times throughout fiscal 2020, due to the COVID-19 pandemic, we temporarily closed store locations to customer access, across all of our operating regions, the U.S., Canada, Europe and Australia. These temporary store closures began in late March 2020 and by the end of June 2020, following the implementation of the highest level of health and safety protocols recommended by the federal and local health and governmental authorities, 98% of our stores globally were open to the public. During the third quarter of fiscal year 2020, the substantial majority of our stores were open, with approximately 15% of our stores in Australia temporarily closed for approximately four weeks due to an outbreak of COVID-19. Beginning in late October 2020 and continuing throughout the fiscal fourth quarter, as COVID-19 cases began to escalate in regions around the world, all of our stores in France and Ireland were temporarily closed as required by governmental authorities, while certain other stores in each of our operating segments began more long-term or fluctuating temporary closures as required by the various governmental authorities. Although certain stores remain closed, some of our stores in France, Ireland, and Canada were and are offering curbside pick-up. We remained vigilant in our compliance with COVID-19 regulations across our operating regions, and as such reverted a minor number of store operations in the United States in early November to curbside pick-up only, all of which reopened for customer access in late 2020. In late December 2020 and extending through the end of fiscal 2020, we experienced an increase in temporary store closures in all but the Australian segment, with certain jurisdictions in Canada, US, and Europe allowing for curbside pickup.

During the early stages of the global pandemic and subsequent period of temporary closures, we took steps to continue to serve our customers via our e-commerce platform including, but not limited to enhancing our online capabilities and offering curbside pick-up options while also lowering our purchase and expense levels to correspond with the lower demand.

We continue to prioritize the health and safety of our customers and team members. As a result, during fiscal 2020, we incurred approximately $25 million in costs to mitigate the impact of the COVID-19 pandemic including incremental wage payments to hourly associates to help offset lost wages due to store closures, enhanced cleaning measures and expanded use of personal protective equipment at our stores, shared service centers and distribution centers across all geographies where we operate. We anticipate that we will continue to incur some or all of these costs well into the fiscal year 2021.

The COVID-19 pandemic remains a rapidly evolving situation and the impact on our business, operating results, cash flows and financial conditions will also depend on many factors that are not within our control, including the following:

•the geographies impacted by the virus;

•changes in consumer confidence and consumer spending habits, including spending for the merchandise that we sell;

•negative trends in consumer purchasing patterns due to changes in consumers' disposable income, credit availability and debt levels;

•the availability of additional economic stimulus programs introduced by the various governments where we operate;

•disruption to our supply chain including the manufacturing, supply, distribution, transportation and delivery of our products;

•delays in the release of key video game titles; and

•a slowdown in the U.S. and global economies, and the timing of the post-pandemic economic recovery.

We continue to take steps to improve cash flows and liquidity, which we believe will enhance our resiliency as we emerge from the COVID-19 pandemic, including:

•reducing inventory receipts to match demand, focusing our purchasing efforts on key hardware, software and accessories products, thereby minimizing late product cycle markdowns;

•concentrating capital spending on required maintenance or near-term high value strategic projects; and

•divesting non-strategic assets to free up cash for deployment to strategic investments and initiatives

In addition, during the first quarter of fiscal 2020 and the beginning of the second quarter of fiscal 2020, we took the following steps to preserve liquidity while most of our stores were temporarily closed:

•reduced the base salary for our executive leadership team by graduated amounts ranging from 30%-50% for 9 weeks;

•lowered the cash compensation for the members of the Board of Directors by 50% for 9 weeks;

•reduced pay for certain other associates by graduated amounts across most of the worldwide permanent workforce between 10% and 30% for 9 weeks; and

•forewent merit pay increases for the majority of our associates for fiscal 2020.

See Note 3, "COVID-19 Impacts" for further details.

Industry Overview

Growth in the video game industry is generally driven by the introduction of new technology. Gaming consoles have historically launched in five to seven-year cycles as technological developments provide significant improvements in the gaming experience and add other entertainment capabilities. Consumer demand for gaming consoles is typically the highest in the early years of the cycle and the weakest in the latter years. The current generation of consoles includes the Sony PlayStation 5 (launched in November 2020), Microsoft Xbox Series X (launched in November 2020) and the Nintendo Switch (launched in March 2017). The Sony PlayStation 4 and Microsoft Xbox One are nearing the end of their cycle due to the launch of Sony and Microsoft next generation consoles.

The sale of video games delivered through digital channels and other forms of gaming continue to grow and represent an increasing percentage of physical video game sales. We currently sell various types of products that relate to the digital category, including digitally downloadable content (“DLC”), full game downloads, Xbox LIVE, PlayStation Plus and Nintendo network points cards, as well as prepaid digital and prepaid subscription cards. We have made significant investments in our e-commerce and store functionality to enable our customers to access digital content to facilitate the digital sales and delivery process. We plan to continue to invest in these types of processes and channels to grow our digital sales base and enhance our market leadership position in the video game industry.

In our discussion of the results of operations, we refer to comparable store sales, which is a measure commonly used in the retail industry and indicates store performance by measuring the growth or decline in sales for certain stores for a particular period over the corresponding prior year's comparable period.

Our comparable store sales are comprised of sales from our video game stores, including stand-alone collectible stores, operating for at least 12 full months as well as sales related to our websites and sales we earn from sales of pre-owned merchandise to wholesalers or dealers. Comparable store sales for our international operating segments exclude the effect of changes in foreign exchange rates.

Historically, stores with an active lease designation were included in our comparable stores sales even if there were temporary closures because such temporary closures were primarily due to remodeling and relocations and were typically resolved within fewer than 14 days. However beginning in the first quarter of our fiscal year 2020, as a result of COVID-19 related closures, we excluded stores from the comparable sales base that were closed for 14 consecutive days or more and where curbside delivery was not available to customers. Therefore, comparable sales results for fiscal 2020 exclude stores that were closed for periods of 14 consecutive days or more primarily due to the COVID-19 pandemic where curbside delivery was not available to customers. These criteria are consistent with the metrics used by management for internal reporting and analysis to measure performance of our stores.

The calculation of comparable store sales compares fiscal 2020 to the most closely comparable prior year period. The method of calculating comparable store sales varies across the retail industry. As a result, our method of calculating comparable store sales may not be the same as other retailers’ methods. We believe our calculation of comparable store sales best represents our strategy as a retailer that provides our consumers several ways to access our products.

BUSINESS STRATEGY

In 2019, we announced our multi-year transformation initiative, which we refer to as GameStop Reboot to position GameStop on a strategic path to fully leverage our unique position and brand in gaming. Our strategic plan is anchored on the following tenets and designed to first stabilize and optimize our core business while at the same time, pursuing strategic initiatives to transform GameStop for the future by expanding our addressable market and product offerings to drive growth in the gaming and entertainment industries.

Stabilize and Optimize the core business.Improve the efficiency and effectiveness of operations across the organization, including cost restructuring, inventory management optimization, adding and growing high margin product categories, and rationalizing the global store base. Prioritizing efforts to optimize the store base and improve the fundamental operations of the business yielded the net closure of 321 stores in fiscal 2019, 693 stores in fiscal 2020, and included both the divestiture of the Simply Mac business and wind down of underperforming operations in Denmark, Finland, Norway and Sweden. Improved inventory management drove a significant increase in inventory turns and as a result, in working capital, while an intense focus on organization structure and expense reductions yielded a $408.5 million or 21.2% reduction in reported Selling, General and Administrative costs in fiscal 2020 as compared to fiscal 2019. We continue to explore strategic options for our European businesses, which may include further store closings, exiting unprofitable businesses, or investing in e-commerce capabilities.

Transform GameStop into a customer-obsessed technology company to delight gamers. The Company is taking the below steps in fiscal 2021:

•Investing in technology capabilities, including by in-sourcing talent and revamping systems, and evaluating next-generation assets.;

•Building a superior customer experience;

•Expanding product offerings to include PC gaming, computers, monitors, game tables, mobile gaming, and gaming TVs;

•Modernizing U.S. fulfillment operations to improve speed of delivery and service;

•Establishing a U.S.-based customer care operation, and;

•Leveraging the Company’s digital assets, including Game Informer and PowerUp Rewards, to increase market share within the growing online gaming community.

We believe these future transformation efforts are an important aspect of our continued business to enable long-term value creation for our shareholders.

Connected to our transformation efforts, we have incurred and may continue to incur severance, store closure costs and expenses for consultants and advisors. See "Consolidated Results from Operations—Selling, General and Administrative Expenses" for further information.

STORE COUNT INFORMATION

The following table presents the number of stores by segment as of the end of fiscal 2020 compared to the end of fiscal 2019.

SEASONALITY

Our business, like that of many retailers, is seasonal, with the major portion of sales and operating profit realized during the fourth quarter which includes the holiday selling season. Results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. Quarterly results may fluctuate materially depending upon, among other factors, the timing of new product introductions, sales impacts of COVID-19 related temporary store closures, increases or decreases in comparable store sales, the nature and timing of acquisitions, adverse weather conditions, shifts in the timing of certain holidays or promotions and changes in our merchandise mix. During fiscal 2020 and 2019, we generated approximately 42% and 34%, respectively, of our sales during the fourth quarter.

CONSOLIDATED RESULTS OF OPERATIONS

The following table sets forth certain statement of operations items (in millions) and as a percentage of net sales, for the periods indicated:

Gain on sale of assets (32.4) (0.6) — — — —

The following table sets forth net sales by significant product category for the period indicated (dollars in millions):

Net sales by reportable segment in U.S. dollars were as follows (in millions):

Fiscal 2020 Compared to Fiscal 2019

Net Sales

Net sales decreased $1,376.2 million, or 21.3%, in fiscal 2020 compared to fiscal 2019. The decrease in net sales was primarily attributable to the impact of numerous COVID-19 related temporary store closures across every one of our operating regions, 693 net permanent global store closures and a decrease in comparable store sales of 9.5%. This decrease is consistent with the wind down of the last generation of video game consoles that occurred through three fiscal quarters of

2020 and prior to the launch of Microsoft and Sony new generation video game consoles in the fourth quarter of 2020. The decrease in net sales for the fourth fiscal quarter was primarily attributable to the combined impacts of temporary store closures and suppressed customer traffic due to the COVID-19 pandemic, primarily offset by positive 6.5% comparable store sales, which was led by sales volume attributable to the launch of the new video game consoles from Sony and Microsoft and continued strong sales of the Nintendo gaming product lines. For fiscal 2020, we experienced declines in the United States, Canada, Europe and New Zealand, which were partially offset by the performance in our Australia segment which increased in sales by 24.9% as stores in Australia remained open for the substantial majority of the fiscal year. These declines were partially offset by the increase in our e-commerce sales, which increased 174.5% and 190.8% in the current quarter and fiscal year periods, respectively, compared to the prior year periods. Although our sales have decreased compared to the prior year periods as described above, we believe the COVID-19 pandemic has increased demand for at home entertainment and connectivity products as consumers are spending more time in their homes and seek in-home entertainment options.

In total, net sales during fiscal 2020 in our United States, Canada and Europe segments declined by 24.0%, 24.9% and 28.2%, respectively, while net sales in our Australia segment increased 19.0%, when compared to fiscal 2019. Comparable store sales in the United States, Canada and Europe decreased by 13.9%, 6.2% and 10.0%, respectively, while comparable store sales increased in the Australia segment by 23.5%, primarily due to the same factors described above.

Gross Profit

Gross profit decreased $649.2 million, or 34.0%, in fiscal 2020 compared to fiscal 2019, and gross profit as a percentage of net sales decreased to 24.7% in fiscal 2020 compared to 29.5% in fiscal 2019. The decrease in gross profit as a percentage of net sales was primarily due to the mix of sales into lower margin categories such as new console hardware given the launch of generation 9 consoles, increased freight and credit card fees associated with the shift to e-commerce sales, and a broader promotional stance.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses decreased $408.5 million, or 21.2%, in fiscal 2020 compared to fiscal 2019. Fiscal 2020 and fiscal 2019 included $9.2 million and $76.3 million of costs with our transformation initiatives, business divestitures, severance and other charges, respectively. Excluding these charges, the decrease in SG&A in the period was primarily due to lower payroll and occupancy costs driven by the extensive cost reduction initiatives we have undertaken. These reductions include permanent store closures as we de-densify our store base. Additionally, and to a lesser extent, there were lower variable expenses as a result of lower sales volume related to the impacts of the COVID-19 pandemic. See Note 3, "COVID-19 Impacts" for further details.

Goodwill and Asset Impairments

Goodwill and asset impairments decreased $370.1 million, or 96.0% in fiscal 2020 compared to fiscal 2019 as the Company fully impaired its goodwill in fiscal 2019. In the second quarter of fiscal 2020, we sold our corporate aircraft resulting in an impairment charge of $3.2 million. We also incurred an impairment charge associated with store-level assets of $1.6 million in the 39 weeks ended October 31, 2020, respectively. In the fourth quarter of fiscal 2020, we incurred impairment charges of $9.6 million related to store-level, property and equipment and right-of-use asset impairment charges and $1.1 million associated with our Micromania and ThinkGeek trade names. See Note 8, “Goodwill and Intangible Assets,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information. We have no remaining goodwill balances as of January 30, 2021.

Gain on Sale of Assets

During the second quarter of fiscal 2020, we sold, in separate unrelated transactions, to unaffiliated third parties i) our corporate headquarters and ancillary office space in Grapevine, Texas for $28.5 million, net of costs to sell and ii) a nearby refurbishment center for $15.2 million, net of costs to sell. With respect to the leaseback of the corporate headquarters, we agreed to provide a letter of credit to the buyer-lessor within 18 months from the closing date to secure our lease obligation. Upon delivering such letter of credit, we will be entitled to a rent credit of $2.8 million. This variable consideration is included in the total gain on sale of assets recognized during fiscal 2020.

During the third quarter of fiscal 2020, we sold our Australian headquarters in Eagle Farm, Queensland to an unrelated party for approximately $27.0 million, net of costs to sell, and immediately leased back the facility for a term of ten years on market rate terms at an average annual base rent of $1.7 million, plus taxes, utilities, management fees and other operating and maintenance expenses. Additionally, in September 2020, we sold our Canadian headquarters in Brampton, Ontario for approximately $16.7 million, net of costs to sell, and leased back the facility for a term of five years on market rate terms at an average annual base rent of $0.9 million plus taxes, utilities, management fees and other operating and maintenance expenses.

The net proceeds from the sale of these assets are being used for general corporate purposes. As a result of the transactions that occurred during the second and third quarters of fiscal 2020, a gain on sale of assets of $32.4 million was recognized and is included in our consolidated statement of operations for fiscal 2020.

See Note 11, "Leases," for further information regarding the sale and leaseback of these facilities.

Interest Expense, Net

Interest expense, net increased by $4.9 million, or 18.0%, for fiscal 2020 compared to fiscal 2019, primarily due to higher interest expense associated with the July 2020 exchange of $216.4 million in aggregate principal amount of 2021 Senior Notes for 2023 Senior Notes. Furthermore, offsets of interest income in 2020 is lower as compared to 2019 primarily due to lower global interest rates earned on cash and cash equivalents.

Income Tax

Income tax benefit was $55.3 million, representing an effective tax rate of 20.5% in fiscal 2020, compared to $37.6 million expense in fiscal 2019, representing a negative effective tax rate of 8.8%. The effective tax rate of 20.5% is primarily driven by the establishment of a full valuation allowance on U.S. deferred tax assets, a change in the tax status of certain foreign entities, and the impact of the CARES Act, including tax benefits associated with the availability of a five-year carryback period for certain current year tax losses. The negative effective tax rate of 8.8% in fiscal 2019 was primarily the result of a permanent difference for non-deductible impairment charges and valuation allowances recognized in the year. See Note 9, "Income Taxes," to our consolidated financial statements.

(Loss) Income from Discontinued Operations, Net of Tax

Loss from discontinued operations, net of tax, totaled $0.7 million in fiscal 2020 compared to loss from discontinued operations, net of tax, of $6.5 million in fiscal 2019. Refer to Note 2, "Discontinued Operations and Dispositions," to our consolidated financial statements for additional information.

For a comparison of our results of operations for 2019 and 2018, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended February 1, 2020, filed with the SEC on March 27, 2020.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal sources of liquidity are cash from operations, cash on hand and our revolving credit facility. We may also fund our growth capital needs, as circumstances warrant, from sales of equity and debt securities. As of January 30, 2021, we had total unrestricted cash on hand of $508.5 million, $126.5 million of restricted cash and an additional $88.4 million of available borrowing capacity under our revolving credit facility. On March 15, 2021, we repaid our outstanding borrowings of $25.0 million under the Revolver (as defined below). See Note 19 “Subsequent Events”.

Availability under our revolving credit facilities, which was increased during the third quarter of fiscal 2020, as described in the Sources of Liquidity section below, provides us additional liquidity throughout the course of the year to fund our operations. Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and net availability under our revolving credit facility will provide sufficient liquidity to fund our operations for the next 12 months as well as the foreseeable future. While factors related to COVID-19 have negatively impacted our results during fiscal 2020, those negative impacts were generally offset by the positive results generated from our working capital initiatives, primarily inventory management and our expense reduction initiatives which supports an improved liquidity position.

We continually review and prioritize our capital needs and are committed to making investments in our infrastructure to drive our business plans and future transformation initiatives. Key areas of future investment include improving the presentation and content as well as the functionality, general search and navigation across our customer-facing digital channels; improving customer data integration and customer relations management capabilities; focusing on enhancing and optimizing the customer service proposition; continuing to strengthen and deepen our information technology, analytics, marketing and e-commerce teams and capabilities; and creating more flexible fulfillment options designed to improve our delivery capabilities and reduce our delivery times and shipping costs. These and other investments are expected to, among other things, provide a seamless and compelling customer experience across our retail platform.

On an ongoing basis, we evaluate and consider certain strategic operating alternatives, including divestitures, restructuring or dissolution of unprofitable business segments, as well as equity and debt financing alternatives that we believe may enhance stockholder value. On July 6, 2020 we issued $216.4 million aggregate principal amount of our 2023 Senior Notes in exchange for an equal aggregate principal amount of our 2021 Senior Notes. See Note 12, "Debt," for further details on this debt exchange. The nature, amount and timing of any strategic operational change, or financing transactions that we might pursue will depend on a variety of factors, including, as of the applicable time, our available cash and liquidity and operating performance; our commitments and obligations; our capital requirements; limitations imposed under our credit arrangements; and overall market conditions.

As a result of the impact of the COVID-19 pandemic around the world, many of our vendors have been impacted by the volatility in the supply chain financing market. As we seek to optimize our inventories, including for next generation video game consoles and a number of new software releases, and related payment terms, we have increased the amount of credit support collateral we provide to select vendors for our inventory purchase obligations. Our continued provision of collateral, and the levels of such collateral, will depend on a variety of factors, including our inventory purchase levels, available payment terms for inventories, availability of borrowing capacity under our credit facilities, favorable credit terms and costs of providing collateral. See Note 1, "Nature of Operations and Summary of Significant Accounting Policies — Restricted Cash" for further details.

Cash Flows

In fiscal 2020, cash flow from operating activities was an inflow of $123.7 million, an increase of $538.2 million compared to an outflow of $414.5 million during the same period last year. The increase was primarily due to improvements in working capital as a result of optimizing inventory and accounts payable levels through optimizing the cash conversion cycle and more efficient carrying levels of inventory.

In fiscal 2019, cash provided by operations was an outflow of $414.5 million, compared to an inflow of $325.1 million in fiscal 2018. The decrease in cash provided by operations of $739.6 million from fiscal 2018 to fiscal 2019 was primarily due to timing of vendor payments and lower earnings in fiscal 2019 compared to prior year.

In fiscal 2020, cash from investing activities was an inflow of $36.9 million compared to an outflow of $60.9 million in fiscal 2019 and a cash inflow of $635.5 million in fiscal 2018. The fiscal 2020 cash inflow from investing activities was primarily attributable to the proceeds from the sale and leaseback of five properties including our headquarter facilities in the United States, Australia and Canada as well as a refurbishment center and ancillary office space in Grapevine, Texas, lower capital expenditures in the current year period and $8.6 million net proceeds from the sale of our corporate aircraft. See Note 1, "Nature of Operations and Summary of Significant Accounting Policies," and Note 11, "Leases" for further information.

In fiscal 2018, cash provided by investing activities included $727.9 million in proceeds from divestitures, primarily from the sale of Spring Mobile. Capital expenditures totaled $60.0 million, $78.5 million and $93.7 million in fiscal 2020, 2019 and 2018, respectively.

In fiscal 2020, our financing activities were a net cash outflow of $55.4 million consisting primarily of the repayment of $130.3 million of our 2021 Senior Notes through a combination of open market transactions and an optional early redemption of $125.0 million of our 2021 Senior Notes, at par, in December 2020, partially offset by a net $25.0 million draw down on our Revolver and $47.1 million in proceeds from term loans entered into by our French subsidiary, Micromania SAS.

In 2019, our financing activities were a net cash outflow of $644.7 million consisting primarily of the redemption of our $350.0 million 2019 senior notes in April 2019, repurchases of our Class A Common Stock totaling $198.7 million, open market repurchases of our 2021 Senior Notes totaling $53.6 million and dividends paid on our Class A Common Stock of $40.5 million. In fiscal 2018, our financing activities were a net cash outflow of $174.7 million consisting primarily of dividends paid of $157.4 million and repayment of acquisition-related debt of $12.2 million.

Sources of Liquidity

We utilize cash generated from operations and have funds available to us under our revolving credit facility to cover seasonal fluctuations in cash flows and to support our various initiatives. Our cash and cash equivalents are carried at cost and consist primarily of time deposits with commercial banks.

We maintain an asset-based revolving credit facility (the “Revolver”) with a borrowing base capacity of $420 million and a maturity date of November 2022. The Revolver also includes a $200 million expansion feature and $100 million letter of credit sublimit, and allows for an incremental $50 million first-in, last-out facility. The applicable margins for prime rate loans range from 0.25% to 0.50% and, for the London Interbank Offered ("LIBO") rate loans, range from 1.25% to 1.50%. The Revolver is secured by substantially all of the assets of GameStop Corp. and the assets of its domestic subsidiaries, such lien being junior to the lien in certain of such assets that secure the 2023 Senior Notes. We are required to pay a commitment fee of 0.25% for any unused portion of the total commitment under the Revolver. As of January 30, 2021, the applicable margin was 0.50% for prime rate loans and 1.50% for LIBO rate loans. As of January 30, 2021, total availability under the Revolver after giving effect to the Availability Reduction (as defined below) was $88.4 million, with outstanding borrowings of $25.0 million and outstanding standby letters of credit of $9.8 million. On March 15, 2021, we repaid our outstanding borrowings of $25.0 million under the Revolver. See Note 19 “Subsequent Events”.

In August 2020, we entered into the fourth amendment (“Fourth Amendment”) to the credit agreement governing our Revolver (“Credit Agreement”) giving effect to certain amendments, which are incorporated above and include, but are not limited to the following:

•Reduced the amount of the excess availability trigger that determines whether the Company is subject to a fixed charge coverage ratio covenant of 1.0:1.0 from the greater of $30 million and 10% of the borrowing base to the greater of $12.5 million and 10% of the borrowing base;

•Increased the sublimit for issuances of letters of credit under the Credit Agreement from $50 million to $100 million; and

•Increased the amount of letters of credit permitted to be issued separately from, and not pursuant to, the Credit Agreement from $25 million to (i) up to $150 million for letters of credit issued by borrowers/guarantors under the Credit Agreement and (ii) up to $75 million for letters of credit issued for the benefit of foreign subsidiaries, subject to the understanding that the outstanding amount of letters of credit issued under the Credit Agreement, combined with the outstanding amount of letters of credit otherwise permitted by the Credit Agreement cannot exceed $275 million in the aggregate.

The agreement governing our Revolver and the indentures governing our 2021 Senior Notes and 2023 Senior Notes place certain restrictions on us and our subsidiaries, including, among others, limitations on asset sales, additional liens, investments, incurrence of additional debt and share repurchases. In addition, the agreement governing our Revolver and the indentures governing our 2021 Senior Notes and 2023 Senior Notes contain customary events of default, including, among others, payment defaults, breaches of covenants and certain events of bankruptcy, insolvency and reorganization. The Revolver is also subject to a fixed charge coverage ratio covenant if excess availability is below certain thresholds (the "Availability Reduction"). We are currently in compliance with all covenants under the indentures governing the 2021 Senior Notes and 2023 Senior Notes and the agreement governing our Revolver.

As of January 30, 2021, the aggregate principal amounts outstanding of our 2021 Senior Notes and 2023 Senior Notes were $73.2 million and $216.4 million, respectively. Additionally, as of January 30, 2021, the aggregate principal balance outstanding under term loans entered into by our French subsidiary, Micromania SAS, was €40.0 million ($48.6 million as of January 30, 2021).

On March 15, 2021, we redeemed the remaining $73.2 million principal amount of our 2021 Senior Notes. See Note 19 “Subsequent events”

Our French subsidiary, Micromania SAS, also maintained a credit facility of €20.0 million ($24.3 million as of January 30, 2021) that allows it to obtain short term loans of 10 to 93 days in duration to support its working capital needs. The credit facility commitments expired in January 2021. No amounts were drawn under this facility through January 30, 2021.

Separately from the asset-based Revolver, we maintain uncommitted letter of credit facilities with certain lenders that provide for the issuance of letters of credit and bank guarantees, at times supported by cash collateral. As of January 30, 2021, we had $133.3 million of outstanding letters of credit and other bank guarantees under facilities outside of the Revolver.

See Note 12, "Debt," for additional information.

We may also fund our growth capital needs, as circumstances warrant, from sales of equity and debt securities. The timing and amount of any equity sales would depend on, among other factors, our capital needs and alternative sources and costs of capital available to us, market perceptions about us, and the then current trading price of our common equity.

In December 2020, we entered into the ATM Program. Sales of our Class A Common Stock under the ATM Program may be made by means of transactions that are deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the Securities Act, including block transactions, sales made directly on the NYSE or sales made into any other existing trading markets of our shares of Class A Common Stock. We are under no obligation to offer and sell shares of our Class A Common Stock under the ATM Program. As of January 30, 2021, and through the date of this Form 10-K, we have not sold any shares of our Class A Common Stock under the ATM Program. Since January 2021, we have been evaluating whether to increase the size of the ATM Program and whether to potentially sell shares of our Class A Common Stock under the increased ATM Program during the course of fiscal 2021, primarily to fund the acceleration of our future transformation initiatives. The timing and amount of sales under the ATM Program would depend on, among other factors, our capital needs and alternative sources and costs of capital available to us, market perceptions about us, and the then current trading price of our Class A Common Stock.

Net proceeds from sales of our shares of Class A Common Stock under the ATM Program are expected to be used for working capital and general corporate purposes, which may include funding our ongoing digital-first growth strategy and product category expansion efforts. For additional information, see Item 1. Business - Business and Growth Strategies.

Share Repurchases

On March 4, 2019, our Board of Directors approved a share repurchase authorization allowing us to repurchase up to $300.0 million of our Class A Common Stock. The authorization has no expiration date.

On June 11, 2019, we commenced a modified Dutch auction tender offer for up to 12.0 million shares of our Class A Common Stock with a price range between $5.20 and $6.00 per share. The tender offer expired on July 10, 2019. Through the tender offer, we accepted for payment 12.0 million shares at a purchase price of $5.20 per share for a total of $62.9 million, including fees and commissions. The shares purchased through the tender offer were immediately retired.

In addition to the equity tender offer described above, during the second half of fiscal 2019, we executed a series of open market repurchases for an aggregate of 26.1 million shares of our Class A Common Stock totaling $135.8 million, including fees and commissions. These repurchased shares were immediately retired.

In aggregate, during fiscal 2019, we repurchased a total of 38.1 million shares of our Class A Common Stock, totaling $198.7 million, for an average price of $5.19 per share. We did not repurchase shares during fiscal 2020 or fiscal 2018. As of January 30, 2021, we have $101.3 million remaining under the repurchase authorization.

Tax Withholdings

As of January 30, 2021, our executive officers and other employees held an aggregate of 4.6 million unvested shares of restricted stock, including 0.3 million unvested shares of restricted stock that are scheduled to vest in the ordinary course in the first quarter of fiscal 2021. The vesting of shares of restricted stock may accelerate in connection with certain events (such as the cessation of the grantee’s employment due to death or disability, termination by us without cause or resignation by the grantee with good reason), whether under the terms of employment agreements, our severance plans or policies, or otherwise.

Tax withholding obligations arise upon the vesting of shares of restricted stock and these obligations must be satisfied at the time they arise through cash payments to the applicable taxing authorities. The amount of the tax withholding obligations due upon the vesting of shares of restricted stock is dependent on the price of our shares of Class A Common Stock on the New

York Stock Exchange on the applicable vesting date. The higher the price of the shares of our Class A Common Stock on the vesting date, the higher the tax withholding amount that will be due.

If we were to elect to satisfy tax withholding obligations by withholding and canceling a portion of the shares subject to vesting (sometimes referred to as “share withholding”) and remitting cash to the taxing authorities at the applicable statutory rates on behalf of the holder(s) of applicable awards then, depending on the price of our Class A Common Stock on the vesting date, the amount of these cash payments could be substantial and could have a negative impact on our liquidity and ability to use funds for operational purposes.

We may seek to implement “sell-to-cover” arrangements with one or more holders of shares of restricted stock to minimize our expenditure of cash to satisfy tax withholding obligations. Under such arrangements, a broker would assist the holder to sell, in the open market, all or a portion of the shares subject to vesting and would remit a portion of the sales proceeds to us. We would in turn remit such amounts to the taxing authorities. Such “sell-to-cover” arrangements would enable us to satisfy tax withholding obligations and remain in a net neutral cash position.

Our Class A Common Stock price has recently experienced extreme price fluctuations. Assuming, solely for illustration purposes, a stock price of $209.81 per share (the closing price of our shares of Class A Common Stock on the New York Stock Exchange on March 17, 2021) upon vesting of all of the shares of restricted stock scheduled to vest in the ordinary course during the first quarter of fiscal 2021 (0.3 million shares), we estimate that the aggregate amount of our tax withholdings obligations on account of these awards would be approximately $18.6 million. Accordingly, if we arranged for share withholding for all such awards, we would be required to expend such dollar amount in cash. Alternatively, if we arranged with the applicable employees for “sales-to-cover” for all such awards, then our net cash balances would not change materially and approximately 0.1 million shares of our Class A Common Stock would be sold on the open market (assuming each share were sold at $209.81). The foregoing amounts are illustrative and the actual amount of the tax obligations and the number of shares to be delivered or sold could be higher or lower, depending on the price of our Class A Common Stock upon vesting, the applicable tax withholding rates then in effect, the price at which any sales to cover were to occur and the number (if any) of restricted stock awards that are forfeited prior to vesting.

Dividends

We paid cash dividends of $0.3 million, $40.5 million and $157.4 million in fiscal 2020, 2019 and 2018, respectively. On June 3, 2019, our Board of Directors elected to eliminate the Company’s quarterly dividend, effective immediately, in an effort to strengthen the Company's balance sheet and provide increased financial flexibility. Dividends paid in fiscal 2020 represents dividends previously declared on unvested restricted stock awards granted under the 2011 Plan as discussed in Note 14 "Common Stock and Share-Based Compensation". These dividends are paid upon vesting of the restricted stock awards. We believe the decision to eliminate the dividend will enable us to further reduce debt and provide us flexibility as we seek to drive value creation for stockholders.

CONTRACTUAL OBLIGATIONS

The following table sets forth our contractual obligations as of January 30, 2021 (in millions):

Payments Due by Fiscal Period

French term loans 48.6 48.6 — — — — —

___________________

(1) Purchase obligations represent outstanding purchase orders for merchandise from vendors. These purchase orders are generally cancellable until shipment of the products.

(2) As of January 30, 2021, we had $9.1 million of income tax liability related to unrecognized tax benefits in other long-term liabilities in our consolidated balance sheet. At the time of this filing, the settlement period for the noncurrent portion of our income tax liability (and the timing of any related payments) cannot be reasonably determined and therefore these liabilities are excluded from the table above. In addition, certain payments related to unrecognized tax benefits would be partially offset by reductions in payments in other jurisdictions. See Note 9, "Income Taxes," to our consolidated financial statements for further information regarding our uncertain tax positions.

We lease retail stores, warehouse facilities, office space and equipment. These are generally leased under noncancelable agreements that expire at various dates with various renewal options for additional periods. The agreements, which have been classified as operating leases, generally provide for minimum and, in some cases, percentage rentals and require us to pay all insurance, taxes and other maintenance costs. Percentage rentals are based on sales performance in excess of specified minimums at various stores.

As of January 30, 2021, we had standby letters of credit outstanding in the amount of $9.8 million and had other bank guarantees outstanding in the amount of $133.3 million, of which $57.6 million is cash collateralized.

OFF-BALANCE SHEET ARRANGEMENTS

We had no material off-balance sheet arrangements as of January 30, 2021 other than those disclosed Note 12, "Debt" to our audited consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. Changes in the estimates and assumptions used by us could have a significant impact on our financial results, and actual results could differ from those estimates. Our senior management has discussed the development and selection of these critical accounting policies, as well as the significant accounting policies disclosed in Note 1, "Nature of Operations and Summary of Significant Accounting Policies," to our consolidated financial statements, with the Audit Committee of our Board of Directors. We believe the following accounting policies are the most critical to aid in fully understanding and evaluating our reporting of transactions and events, and the estimates these policies involve require our most difficult, subjective or complex judgments.

Valuation of Merchandise Inventories

Our ability to gauge these factors is dependent upon our ability to forecast customer demand and to provide a well-balanced merchandise assortment. Any inability to forecast customer demand properly could lead to increased costs associated with write-downs of inventory to reflect volumes or pricing of inventory which we believe represents the net realizable value. A 10% change in our obsolescence reserve percentage at January 30, 2021 would have affected net earnings by approximately $1.9 million in fiscal 2020.

Customer Liabilities

Our PowerUp Rewards loyalty program allows enrolled members to earn points on purchases in our stores and on some of our websites that can be redeemed for rewards and discounts. We allocate the transaction price between the product and loyalty points earned based on the relative stand-alone selling prices and expected point redemption. The portion allocated to the loyalty points is initially recorded as deferred revenue and subsequently recognized as revenue upon redemption or expiration. The two primary estimates utilized to record the deferred revenue for loyalty points earned by members are the estimated retail price per point and estimated amount of points that will never be redeemed, which is a concept known in the retail industry as "breakage." Additionally, we sell gift cards to our customers in our retail stores, through our website and through selected third parties. At the point of sale, a liability is established for the value of the gift card. We recognize revenue from gift cards when the card is redeemed by the customer and recognize estimated breakage on gift cards in proportion to historical redemption patterns.

The two primary estimates utilized to record the balance sheet liability for loyalty points earned by members are the estimated redemption rate and the estimated weighted-average retail price per point redeemed. We use historical redemption rates experienced under our loyalty program as a basis for estimating the ultimate redemption rate of points earned. The estimated retail price per point is based on the actual historical retail prices of product purchased through the redemption of loyalty points. We estimate breakage of loyalty points and unredeemed gift cards based on historical redemption rates. A weighted-average retail price per point redeemed is used to estimate the value of our deferred revenue associated with loyalty points. The weighted-average retail price per point redeemed is based on our most recent actual loyalty point redemptions and is

adjusted as appropriate for recent changes in redemption values, including the mix of rewards redeemed. Our estimate of the amount and timing of gift card redemptions is based primarily on historical transaction experience.

We continually evaluate our methodology and assumptions based on developments in redemption patterns, retail price per point redeemed and other factors. Changes in the ultimate redemption rate and weighted-average retail price per point redeemed have the effect of either increasing or decreasing the deferred revenue balance through current period revenue by an amount estimated to cover the retail value of all points previously earned but not yet redeemed by loyalty program members as of the end of the reporting period. A 10% change in our customer loyalty program redemption rate or a 10% change in our weighted-average retail value per point redeemed at January 30, 2021, in each case, would have affected net earnings by approximately $2.1 million in fiscal 2020. A 10% change in our gift card breakage rate at January 30, 2021 would have affected net earnings by approximately $11.0 million in fiscal 2020.

Income Taxes

We account for income taxes utilizing an asset and liability approach, and deferred taxes are determined based on the estimated future tax effect of differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates. As a result of our operations in many foreign countries, our global tax rate is derived from a combination of applicable tax rates in the various jurisdictions in which we operate.

Additionally, a valuation allowance is recorded against a deferred tax asset if it is not more likely than not that the asset will be realized. We assess the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. Several factors are considered in evaluating the realizability of our deferred tax assets, including the remaining years available for carry forward, the tax laws for the applicable jurisdictions, the future profitability of the specific business units, and tax planning strategies. Based on our analysis, we have determined existing deferred tax assets are not more likely than not to be realized. We have therefore established valuation allowances in all jurisdictions. Our valuation allowance increased to $225.7 million as of January 30, 2021, due to cumulative losses in certain foreign jurisdictions. See Note 9, "Income Taxes" to our consolidated financial statements.

We maintain accruals for uncertain tax positions until examination of the tax year is completed by the taxing authority, available review periods expire, or additional facts and circumstances cause us to change our assessment of the appropriate accrual amount. Our liability for uncertain tax positions was $9.1 million as of January 30, 2021. Considerable management judgment is necessary to assess the inherent uncertainties related to the interpretations of complex tax laws, regulations and taxing authority rulings, as well as to the expiration of statutes of limitations in the jurisdictions in which we operate. We base our estimate of an annual effective tax rate at any given point in time on a calculated mix of the tax rates applicable to our operations and to estimates of the amount of income to be derived in any given jurisdiction. We file our tax returns based on our understanding of the appropriate tax rules and regulations. However, complexities in the tax rules and our operations, as well as positions taken publicly by the taxing authorities, may lead us to conclude that accruals for uncertain tax positions are required.

Our judgments and estimates concerning uncertain tax positions may change as a result of evaluation of new information, such as the outcome of tax audits or changes to or further interpretations of tax laws and regulations. Our judgments and estimates concerning realizability of deferred tax assets could change if any of the evaluation factors change. If such changes take place, there is a risk that our effective tax rate could increase or decrease in any period, impacting our net earnings.

RECENT ACCOUNTING STANDARDS AND PRONOUNCEMENTS

See Note 1, "Nature of Operations and Summary of Significant Accounting Policies," to our consolidated financial statements for recent accounting standards and pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk due to foreign currency and interest rate fluctuations, each as described more fully below.

Foreign Currency Risk

We use forward exchange contracts to manage currency risk primarily related to intercompany loans denominated in non-functional currencies. The forward exchange contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the re-measurement of related intercompany loans. We recognized a loss of $6.1 million and a gain of $4.1 million in selling, general and administrative expenses related to derivative instruments for the fiscal years ended January 30, 2021 and February 1, 2020, respectively. The aggregate fair value of the forward exchange contracts as of January 30, 2021 and February 1, 2020 was a net asset of $0.1 million and $1.1 million, respectively, as measured by observable inputs obtained from market news reporting services, such as Bloomberg, and industry-standard models that consider various assumptions, including quoted forward prices, time value, volatility factors, and contractual prices for the underlying instruments, as well as other relevant economic measures. A hypothetical strengthening or weakening of 10% in the foreign exchange rates underlying the foreign currency contracts from

the market rate as of January 30, 2021 would result in a gain of $11.2 million or a loss of $9.2 million in value of the forwards, options and swaps.

We do not use derivative financial instruments for trading or speculative purposes. We are exposed to counterparty credit risk on all of our derivative financial instruments and cash equivalent investments. We manage counterparty risk according to the guidelines and controls established under comprehensive risk management and investment policies. We continuously monitor our counterparty credit risk and utilize a number of different counterparties to minimize our exposure to potential defaults. We do not require collateral under derivative or investment agreements.

Interest Rate Risk

The per annum interest rate on our $420 million revolving credit facility is variable and is based on (i) the U.S. prime rate, (ii) LIBOR or (iii) the U.S. federal funds rate. We had $25.0 million and no outstanding balance on our revolving credit facility as of January 30, 2021 and February 1, 2020, respectively. On March 15, 2021, we repaid our outstanding borrowings of $25.0 million under the Revolver. See Note 19 “Subsequent Events”. In 2017, the Financial Conduct Authority, the regulatory body of LIBOR, announced its intention to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rate Committee, has proposed the replacement of U.S. dollar LIBOR rates with a new index calculated by short-term repurchase agreements backed by U.S. Treasury securities called the Secured Overnight Financing Rate (“SOFR”). Whether or not SOFR is generally accepted as the LIBOR replacement remains in question and the future of LIBOR at this time is uncertain. Our revolving credit facility matures in November 2022, therefore, we anticipate that we will amend our revolving credit facility prior to the LIBOR quotation termination date. There can be no assurances as to what alternative reference rates may be and whether such rates will be more or less favorable than LIBOR and any other unforeseen impacts of the potential discontinuation of LIBOR.

Our Senior Notes' per annum interest rate is fixed. We do not use derivative financial instruments to hedge interest rate exposure. We limit our interest rate risks by investing our excess cash balances in short-term, highly-liquid instruments with a maturity of one year or less. We do not expect any material losses from our invested cash balances. Additionally, a hypothetical 10% adverse movement in interest rates would not have a material impact on our financial condition, results of operations or cash flows and we therefore believe that we do not have significant interest rate exposure.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15(a)(1) and (2) of this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our management conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act has been appropriately recorded, processed, summarized and reported on a timely basis and are effective in ensuring that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective at the reasonable assurance level. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures to disclose material information otherwise required to be set forth in our periodic reports.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.

A company’s internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with duly documented authorizations of management and directors of the company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting, as of January 30, 2021, based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, known as "COSO". Based on such evaluation, the Company’s management concluded that as of January 30, 2021, the Company’s internal control over financial reporting was effective at a reasonable assurance level.

Deloitte & Touche LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of January 30, 2021. Deloitte & Touche LLP’s opinion, as stated in their report which appears on the following page, is consistent with management’s report on internal control over financial reporting as set forth above.

There was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected or is reasonably likely to material affect our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of GameStop Corp.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of GameStop Corp. and subsidiaries (the “Company”) as of January 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the 52-week period ended January 30, 2021, of the Company and our report dated March 23, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas

March 23, 2021

ITEM 9B. OTHER INFORMATION

Reference is made to the Current Report on Form 8-K that we filed with the SEC on January 11, 2021 that disclosed that on January 10, 2021, we entered into an agreement (the “Agreement”) with RC Ventures LLC and Ryan Cohen. This Form 8-K also disclosed that, pursuant to the Agreement, we agreed that effective at our 2021 annual meeting of stockholders (the “2021 Annual Meeting”), the size of the Board would be reduced from the current 13 directors to nine directors and that the Board would nominate for election the individuals identified in the Form 8-K for election as directors at the 2021 Annual Meeting. As of the date of this Form 10-K, the Board has not determined the definitive slate of nominees but currently expects that the following incumbent directors will retire from the Board at the 2021 Annual Meeting: Lizabeth Dunn, Paul Evans, Raul J. Fernandez, Reginald Fils-Aimé, William Simon, James K. Symancyk, Carrie W. Teffner and Kathy P. Vrabeck. The contemplated retirements are not because of a disagreement with us on any matter relating to our operations, policies or practices.

Reference is made to the Current Report on Form 8-K that we filed with the SEC on the date of this Form 10-K that disclosed that on March 23, 2021, we announced the appointment of Jenna Owens, age 42, as the Company’s Executive Vice President and Chief Operating Officer, effective March 29, 2021. Prior to joining GameStop and since 2017, Ms. Owens served in a variety of senior roles at Amazon.com, Inc., including Director and General Manager of Distribution and Multi-Channel Fulfillment, Director of Associate Experience and Operations for COVID-19 Testing, Director of Global Product and Technology for Grocery Post-Order Customer Experience, and Director and General Manager of Amazon Fresh Pickup. Prior to joining Amazon.com, Inc., Ms. Owens held senior roles at Google, including General Manager of Operations of Google Express from 2012 to 2015 and Head of Operations Efficiency for Americas Ad Sales from 2015 to 2017. From 2011 to 2012, Ms. Owens worked at McKinsey & Co. in the Supply Chain practice where her work included customer-back supply chain transformations of Fortune 500 manufacturers. Ms. Owens has also worked in operations and supply chain at McMaster-Carr Industrial Supply Co. and Honeywell Inc. Ms. Owens holds an Interdisciplinary B.A. from Amherst College and an M.B.A. from New York University’s Leonard N. Stern School of Business.

Reference is made to the Current Report on Form 8-K that we filed with the SEC on February 23, 2021 that disclosed that James A. Bell, our Chief Financial Officer, would cease to be our Chief Financial Officer on or about March 26, 2021 and that if a permanent replacement is not in place at the time that Mr. Bell ceases to be our Chief Financial Officer, then, effective at such time, Diana Saadeh-Jajeh, who is currently serving our Senior Vice President and Chief Accounting Officer, will assume the additional role of interim Chief Financial Officer. Mr. Bell’s cessation as our Chief Financial Officer and Ms. Saadeh-Jajeh’s assumption of the role of interim Chief Financial Officer will occur on March 24, 2021.

Our Board of Directors has formed a committee of directors called the “Strategic Planning and Capital Allocation Committee” (the Strategic Committee). The Committee is responsible for assisting the Board in its oversight of our operational objectives and corporate strategy, capital allocation priorities and other opportunities for maximizing stockholder value. Our Board, through the Strategic Committee, is currently evaluating our executive leadership team skill sets related to meeting changing business requirements and has engaged a third party firm to assist it in its evaluation and exploration. This evaluation and exploration could result in a change in one or more of our senior executives.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE*

Code of Ethics

We have adopted a Code of Ethics for Senior Financial and Executive Officers that is applicable to our Chief Executive Officer, Chief Financial Officer, Chief Merchandising Officer, Chief Customer Officer, Chief Accounting Officer, any Executive Vice President, any Senior Vice President or Vice President employed in a finance or accounting role and any managing director or finance director of all our foreign subsidiaries. We have also adopted a Code of Standards, Ethics and Conduct applicable to all of our associates. Each of the Code of Ethics and Code of Standards, Ethics and Conduct are available on our website at www.gamestop.com.

In accordance with SEC rules, we intend to disclose any amendment (other than any technical, administrative, or other non-substantive amendment) to either of the above Codes, or any waiver of any provision thereof with respect to any of the executive officers listed in the paragraph above, on our website (www.gamestop.com) within four business days following such amendment or waiver.

ITEM 11. EXECUTIVE COMPENSATION*

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS*

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE*

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES*

* The information not otherwise provided herein that is required by Items 10, 11, 12, 13 and 14 will be set forth in the definitive proxy statement relating to our 2021 Annual Meeting of Stockholders to be held on or around June 10, 2021 which is to be filed with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. This definitive proxy statement relates to a meeting of stockholders involving the election of directors and the portions therefrom required to be set forth in this Form 10-K by Items 10, 11, 12, 13 and 14 are incorporated herein by reference pursuant to General Instruction G(3) to Form 10-K.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a)The following documents are filed as a part of this Form 10-K:

(i)Index and Consolidated Financial Statements

The list of consolidated financial statements set forth in the accompanying Index to Consolidated Financial Statements at page F-1 herein is incorporated herein by reference. Such consolidated financial statements are filed as part of this Form 10-K.

(2)Financial Statement Schedules required to be filed by Item 8 of this Form 10-K:

The following financial statement schedule for the 52 weeks ended January 30, 2021, 52 weeks ended February 1, 2020 and the 52 weeks ended February 2, 2019 is filed as part of this Form 10-K and should be read in conjunction with our Consolidated Financial Statements appearing elsewhere in this Form 10-K. All other schedules are omitted because they are not applicable.

(b) Exhibits

The information required by this Section (b) of Item 15 is set forth on the Exhibit Index that follows the Consolidated Financial Statements and Notes to Consolidated Financial Statements appearing elsewhere in this Form 10-K.

Schedule II — Valuation and Qualifying Accounts

For fiscal years 2020, 2019 and 2018:

(In millions)

Inventory Reserve(3)

Valuation Allowance for Deferred Tax Assets

___________________

(1) Consists primarily of amounts received from vendors for defective allowances.

(2) The fiscal year 2019 includes the disposition of $0.3 million of Simply Mac inventory reserves as of the date of the sale. The fiscal year 2018 includes the disposition of $3.6 million of Spring Mobile inventory reserves as of the date of the sale.

(3) Includes inventory reserve activity related to Simply Mac and Spring Mobile. Simply Mac was sold in September 2019 and Spring Mobile was sold in January 2019.

ITEM 16. FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

GAMESTOP CORP.

By: /s/ GEORGE E. SHERMAN

George E. Sherman

Chief Executive Officer

Date: March 23, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Capacity Date

/s/ GEORGE E. SHERMAN Chief Executive Officer and Director March 23, 2021

George E. Sherman (Principal Executive Officer)

/s/ KATHY P. VRABECK Executive Chairman and Director March 23, 2021

Kathy P. Vrabeck

James A. Bell (Principal Financial Officer)

Diana Saadeh-Jajeh (Principal Accounting Officer)

/s/ ALAN ATTAL Director March 23, 2021

Alan Attal

/s/ RYAN COHEN Director March 23, 2021

Ryan Cohen

/s/ LIZABETH DUNN Director March 23, 2021

Lizabeth Dunn

/s/ PAUL J. EVANS Director March 23, 2021

Paul J. Evans

/s/ RAUL J. FERNANDEZ Director March 23, 2021

Raul J. Fernandez

/s/ REGINALD FILS-AIMÉ Director March 23, 2021

Reginald Fils-Aimé

/s/ JIM GRUBE Director March 23, 2021

Jim Grube

/s/ WILLIAM S. SIMON Director March 23, 2021

William S. Simon

/s/ JAMES K. SYMANCYK Director March 23, 2021

James K. Symancyk

/s/ CARRIE W. TEFFNER Director March 23, 2021

Carrie W. Teffner

/s/ KURTIS J. WOLF Director March 23, 2021

Kurtis J. Wolf

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

GameStop Corp. Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm 2

Consolidated Financial Statements:

Consolidated Balance Sheets 4

Consolidated Statements of Operations 5

Consolidated Statements of Comprehensive Income (Loss) 6

Consolidated Statements of Stockholders' Equity 7

Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements:

1. Nature of Operations and Summary of Significant Accounting Policies 9

2. Discontinued Operations and Dispositions 15

5. Asset Impairments. 19

6. Fair Value Measurements and Financial Instruments 20

7. Receivables, Net 21

8. Goodwill and Intangible Assets 22

9. Income Taxes 24

10. Accrued Liabilities 27

13. Commitments and Contingencies 32

14. Common Stock and Share-Based Compensation. 32

15. Earnings Per Share. 34

16. Associates' Defined Contribution Plan 34

17. Segment Information 35

18. Unaudited Quarterly Financial Information. 36

19. Subsequent Events 36

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of GameStop Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of GameStop Corp. and subsidiaries (the "Company") as of January 30, 2021, and February 1, 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for the 52 week periods ended January 30, 2021, February 1, 2020 and February 2, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2021, and February 1, 2020, and the results of its operations and its cash flows for the 52 week periods ended January 30, 2021, February 1, 2020, and February 2, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 23, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, effective February 3, 2019, the Company adopted FASB ASC Topic 842, Leases, using the modified retrospective approach.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Merchandise Inventories - Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company carries merchandise inventories at the lower of cost or market generally using the average cost method. In valuing merchandise inventories, the Company is required to make adjustments to inventory to reflect potential obsolescence or over-valuation as a result of cost exceeding the market. In valuing inventory, management makes significant judgements and estimates, including consideration of quantities on hand, recent sales, potential price protections, returns to vendors, and other factors. Such judgements and estimates are more significant for certain inventory product types.

We identified the inventory reserve for certain inventory products as a critical audit matter because of the significant estimates and the assumptions management makes to estimate the excess, slow-moving, and obsolete inventory adjustments, including consideration of quantities on hand, recent sales, potential price protections, returns to vendors and other factors to estimate future customer demand. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the methodology and the reasonableness of related assumptions, as well as the inputs and

F-2

related calculations, to evaluate whether merchandise inventory reserves for certain inventory products were appropriately recorded as of January 30, 2021.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the excess, slow-moving, and obsolete inventory reserve for certain inventory products included the following, among others:

•We tested the effectiveness of controls over the valuation of inventories.

•We evaluated the appropriateness and consistency of management’s methods and assumptions used in developing their estimate of the excess, slow-moving, and obsolete inventory reserve, which included consideration of reserve trends.

•We performed analysis over key product metrics, inventory turnover, and margins, to identify and evaluate slow-moving inventory categories, negative margins, or other unusual trends.

•We tested a sample of inventory items to assess the reasonableness of the excess, slow-moving, and obsolete inventory reserve through evaluation of historical margin, turnover, discounts, and markdowns.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas

March 23, 2021

We have served as the Company's auditor since 2013.

F-3

GAMESTOP CORP.

CONSOLIDATED BALANCE SHEETS

(in millions, except par value per share)

ASSETS

Current assets:

Cash and cash equivalents $ 508.5 $ 499.4

Prepaid expenses and other current assets 224.9 120.6

Assets held-for-sale — 11.8

Operating lease right-of-use assets 662.1 767.0

Deferred income taxes — 83.0

Long-term restricted cash 16.5 13.8

Other noncurrent assets 41.6 46.3

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued liabilities and other current liabilities 626.8 617.5

Current portion of operating lease liabilities 227.4 239.4

Short-term debt, including current portion of long-term debt, net 121.7 —

Other long-term liabilities 20.5 21.4

Commitments and contingencies (Note 13)

Stockholders’ equity:

Additional paid-in capital 11.0 —

Accumulated other comprehensive loss (49.3) (78.8)

Total liabilities and stockholders’ equity $ 2,472.6 $ 2,819.7

See accompanying notes to consolidated financial statements.

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GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

Fiscal Year

Gain on sale of assets (32.4) — —

Loss from continuing operations before income taxes (269.9) (426.8) (753.1)

(Loss) income from discontinued operations, net of tax (0.7) (6.5) 121.8

Basic (loss) earnings per share:

Continuing operations $ (3.30) $ (5.31) $ (7.79)

Basic loss per share $ (3.31) $ (5.38) $ (6.59)

Diluted (loss) earnings per share:

Continuing operations $ (3.30) $ (5.31) $ (7.79)

Diluted loss per share $ (3.31) $ (5.38) $ (6.59)

Weighted-average shares outstanding:

See accompanying notes to consolidated financial statements.

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GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in millions)

Fiscal Year

Other comprehensive (loss) income:

Foreign currency translation adjustments 29.5 (24.5) (63.4)

See accompanying notes to consolidated financial statements.

F-6

GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions, except for per share data)

Shares Amount

Foreign currency translation — — — (66.5) — (66.5)

Dividends declared, $1.52 per common share — — — — (155.9) (155.9)

Stock-based compensation expense — — 10.7 — — 10.7

Settlement of stock-based awards 0.7 — (5.1) — — (5.1)

Foreign currency translation — — — (24.5) — (24.5)

Dividends declared, $0.38 per common share — — — — (38.5) (38.5)

Stock-based compensation expense — — 8.9 — — 8.9

Settlement of stock-based awards 0.4 — (1.0) — — (1.0)

Foreign currency translation — — — 29.5 — 29.5

Stock-based compensation expense — — 7.9 — — 7.9

Settlement of stock-based awards 1.0 — 3.1 — — 3.1

See accompanying notes to consolidated financial statements.

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GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Fiscal Year

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash flows from operating activities:

Stock-based compensation expense 7.9 8.9 10.7

(Gain) loss on disposal of property and equipment (27.3) 1.9 2.0

Loss (gain) on divestiture — 9.1 (100.8)

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 8.4 3.6 2.2

Prepaid income taxes and income taxes payable (87.0) (75.9) (18.7)

Accounts payable and accrued liabilities (78.6) (792.8) (26.0)

Operating lease right-of-use assets and lease liabilities 19.0 4.1 —

Changes in other long-term liabilities (3.0) — 4.9

Net cash flows provided by (used in) operating activities 123.7 (414.5) 325.1

Cash flows from investing activities:

Purchase of property and equipment (60.0) (78.5) (93.7)

Proceeds from sale of property and equipment 95.5 — —

Proceeds from divestitures, net of cash sold — 5.2 727.9

Proceeds from company-owned life insurance, net — 12.0 —

Net cash flows provided by (used in) investing activities 36.9 (60.9) 635.5

Cash flows from financing activities:

Repayments of senior notes (130.3) (404.5) —

Repurchase of common shares — (198.7) —

Proceeds from French term loans 47.1 — —

Borrowings from the revolver 150.0 — 154.0

Repayments of revolver borrowings (125.0) — (154.0)

Repayment of acquisition-related debt — — (12.2)

Net cash flows used in financing activities (55.4) (644.7) (174.7)

Decrease in cash held for sale — — 10.2

See accompanying notes to consolidated financial statements.

F-8

GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations and Summary of Significant Accounting Policies

The Company

GameStop operates its business in four geographic segments: United States, Canada, Australia and Europe. See Note 17, "Segment Information," for further information.

Our largest vendors are Nintendo, Sony, Microsoft, U&I Entertainment, and Ubisoft Entertainment, which accounted for 31%, 22%, 9%, 3% and 3%, respectively, of our new product purchases in fiscal year 2020. Our largest vendors in fiscal year 2019 were Nintendo, Sony, Microsoft, Electronic Arts and Take-Two Interactive, which accounted for 28%, 18%, 6%, 5%, 5%, respectively, of our new product purchases in fiscal year 2019. Our largest vendors in fiscal year 2018 were Nintendo, Sony, Microsoft, Take-Two Interactive and Activision Blizzard, which accounted for 23%, 22%, 10%, 6%, 4%, respectively, of our new product purchases in fiscal year 2018.

Basis of Presentation and Consolidation

Our consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Our former Spring Mobile business is presented as discontinued operations in the statements of operations for periods presented. The consolidated statement of cash flows is presented on a combined basis for all periods presented and, therefore, does not segregate cash flows from continuing and discontinued operations. The information contained in these notes to our consolidated financial statements refers to continuing operations unless otherwise noted.

Our fiscal year is composed of the 52 or 53 weeks ending on the Saturday closest to the last day of January. Fiscal year 2020 consisted of the 52 weeks ended on January 30, 2021 ("fiscal 2020"). Fiscal year 2019 consisted of the 52 weeks ended on February 1, 2020 ("fiscal 2019"). Fiscal year 2018 consisted of the 52 weeks ended on February 2, 2019 ("fiscal 2018").

Reclassifications

We have made certain reclassifications in our consolidated financial statements in order to conform to the current year presentation. In our consolidated balance sheets, restricted cash of $0.3 million as of February 1, 2020 has been reclassified from prepaid expenses and other current assets to restricted cash to conform to the current year presentation. Additionally, restricted cash of $13.8 million as of February 1, 2020 has been reclassified from other noncurrent assets to long-term restricted cash to conform to the current year presentation.

In our consolidated statements of operations, asset impairments of $21.7 million and $45.2 million for fiscal years 2019 and 2018, respectively, and goodwill impairments of $363.9 million and $970.7 million for fiscal years 2019 and 2018, respectively, have been reclassified to goodwill and asset impairments to conform to the current year presentation.

Use of Estimates

Cash and Cash Equivalents

We consider all short-term, highly-liquid instruments purchased with a remaining maturity of three months or less to be cash equivalents. Our cash and cash equivalents are carried at cost, which approximates market value, and consist primarily of time deposits with highly rated commercial banks. From time to time depending upon interest rates, credit worthiness and other factors, we invest in money market investment funds holding direct U.S. Treasury obligations.

Restricted Cash

Restricted cash of $126.5 million and $14.1 million as of January 30, 2021 and February 1, 2020, respectively, consists primarily of bank deposits that collateralize the Company's obligations to vendors and landlords.

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GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a reconciliation of cash, cash equivalents and restricted cash in the consolidated balance sheets to total cash and cash equivalents and restricted cash in the consolidated statements of cash flows (in millions):

Merchandise Inventories

Our merchandise inventories are carried at the lower of cost or market generally using the average cost method. Under the average cost method, as new product is received from vendors, its current cost is added to the existing cost of product on-hand and this amount is re-averaged over the cumulative units. Pre-owned video game products traded in by customers are recorded as inventory at the amount of the store credit given to the customer. We are required to make adjustments to inventory to reflect potential obsolescence or over-valuation as a result of cost exceeding market. In valuing inventory, we consider quantities on hand, recent sales, potential price protections, returns to vendors and other factors. Our ability to assess these factors is dependent upon our ability to forecast customer demand and to provide a well-balanced merchandise assortment. Inventory is adjusted based on anticipated physical inventory losses or shrinkage and actual losses resulting from periodic physical inventory counts. Inventory reserves as of January 30, 2021 and February 1, 2020 were $45.2 million and $58.0 million, respectively.

Assets Held-for-Sale

The Company's corporate aircraft was classified as assets held-for-sale as of February 1, 2020, which had an estimated fair value, less costs to sell, of $11.8 million. We recognized impairment charges of $3.2 million on the corporate aircraft during the 52 weeks ended January 30, 2021, which was partially attributable to recent economic impacts associated with the COVID-19 pandemic. On June 5, 2020, we sold our corporate aircraft with net cash proceeds from the sale totaling $8.6 million, net of costs to sell. No gain or loss on the sale of the aircraft was recognized.

Property and Equipment

Property and equipment consisted of the following (in millions):

Buildings and leasehold improvements 496.6 611.8

Property and equipment, net $ 201.2 $ 275.9

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation on furniture, fixtures and equipment is computed using the straight-line method over their estimated useful lives ranging from two years to ten years. Maintenance and repairs are expensed as incurred, while betterments and major remodeling costs are capitalized. Leasehold improvements are capitalized and amortized over the shorter of their estimated useful lives or the terms of the respective leases, generally ranging from one year to ten years, which includes reasonably certain renewal options. Costs incurred in purchasing or developing management information systems are capitalized and included in property and equipment. These costs are amortized over their estimated useful lives from the date the technology becomes operational. Our total depreciation expense was $76.8 million, $90.8 million and $96.7 million for fiscal 2020, 2019 and 2018, respectively.

We periodically review our property and equipment when events or changes in circumstances indicate that its carrying amounts may not be recoverable or its depreciation or amortization periods should be accelerated. We assess recoverability based on several factors, including our intention with respect to our stores and those stores' projected undiscounted cash flows. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its fair value, determined based on an estimate of discounted future cash flows or readily available market information for similar assets. We recorded impairment losses of $7.2 million, $6.6 million and $2.1 million in fiscal 2020, 2019 and 2018, respectively. See Note 5, "Asset Impairments," for further information regarding our asset impairment charges.

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GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share Repurchases

On March 4, 2019, our Board of Directors approved a new share repurchase authorization allowing our management to repurchase up to $300 million of our Class A Common Stock with no expiration date. In aggregate, during fiscal 2019, we repurchased a total of 38.1 million shares of our Class A Common Stock, totaling $198.7 million, at an average price of $5.19 per share. We did not repurchase shares during fiscal 2020 or fiscal 2018. As of January 30, 2021, we have $101.3 million remaining under the repurchase authorization.

Goodwill and Intangible Assets

Goodwill represents the excess purchase price over tangible net assets and identifiable intangible assets acquired. Intangible assets are recorded apart from goodwill if they arise from a contractual right and are capable of being separated from the entity and sold, transferred, licensed, rented or exchanged individually. We are required to evaluate goodwill and other intangible assets not subject to amortization for impairment at least annually. This annual test is completed at the beginning of the fourth quarter of each fiscal year or when circumstances indicate the carrying value of the goodwill or other intangible assets might be impaired. Goodwill has been assigned to reporting units for the purpose of impairment testing.

We have four operating segments—United States, Canada, Australia and Europe, which also define our reporting units based upon the similar economic characteristics of operations within each segment, including the nature of products, product distribution, type of customer and separate management within these businesses.

In order to test goodwill for impairment, we compare a reporting unit's carrying amount to its estimated fair value. If the reporting unit’s carrying value exceeds its estimated fair value, then an impairment charge is recorded in the amount of the excess. In fiscal 2019, we estimated the fair value of our United States segment by using a combination of the income approach and market approach. The income approach is based on the present value of future cash flows, which are derived from our long-term financial forecasts, and requires significant assumptions including, among others, a discount rate and a terminal value. The market approach is based on the observed ratios of enterprise value to earnings of the Company and other comparable, publicly traded companies. We recognized goodwill impairment charges totaling $363.9 million in fiscal 2019, primarily due to a decline in our market capitalization, and as a result of the goodwill impairment charge, we have no remaining goodwill. See Note 8, "Goodwill and Intangible Assets" for additional information.

Our indefinite-lived intangible assets consist of trade names that are not amortized but are required to be evaluated at least annually for impairment. If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value, such individual indefinite-lived intangible asset is impaired by the amount of the excess. The fair value of our trade names are estimated by using a relief-from-royalty approach, which assumes the value of the trade name is the discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the trade name and instead licensed the trade name from another company. As a result of our annual impairment testing in fiscal years 2020, 2019 and 2018, we recognized impairment charges totaling $1.1 million, $2.3 million and $43.1 million, respectively, associated with our trade names and dealer agreements. See Note 8, "Goodwill and Intangible Assets" for additional information.

Our definite-lived intangible assets consist primarily of leasehold rights. The estimated useful life and amortization methodology of intangible assets are determined based on the period in which they are expected to contribute directly to cash flows. Intangible assets that are determined to have a definite life are amortized over the life of the asset.

Revenue Recognition

We adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606), effective February 4, 2018 (the first day of fiscal 2018) utilizing the modified retrospective transition approach. Our revenue recognition policy discussed below is subsequent to the adoption of ASU 2014-09. See “—Recently Adopted Accounting Pronouncements” for information regarding our revenue recognition policy prior to the adoption of ASU 2014-09.

We recognize revenue when performance obligations are satisfied by transferring goods or services to the customer in an amount that we expect to collect in exchange for those goods or services. The satisfaction of a performance obligation with a single customer may occur at a point in time or may occur over time. The significant majority of our revenue is recognized at a point in time, generally when a customer purchases and takes possession of merchandise through our stores or when merchandise purchased through our e-commerce properties is delivered to a customer. We have arrangements with customers where our performance obligations are satisfied over time, which primarily relate to extended warranties and our Game Informer magazine. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation based on their relative stand-alone selling price (see "—Loyalty Program").

Revenue is recognized net of sales discounts and net of an estimated sales return reserve. Our sales return policy is generally limited to 30 days or less and as such our sales returns are, and historically have been, immaterial. Revenues do not include sales taxes or other taxes collected from customers.

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GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising revenues for Game Informer are recorded upon release of magazines for sale to consumers. Subscription revenues for our PowerUp Rewards loyalty program and magazines are recognized on a straight-line basis over the subscription period. Revenue from the sales of product replacement plans is recognized on a straight-line basis over the coverage period. Customer liabilities and other deferred revenues for our PowerUp Rewards loyalty program, gift cards, customer credits, magazines and product replacement plans are included in accrued liabilities.

We also sell a variety of digital products which generally allow consumers to download software or play games on the internet. The significant majority of the digital products we sell are unbundled and do not require us to purchase inventory or take physical possession of, or take title to, inventory. When purchasing these products from us, consumers pay a retail price and we earn a commission based on a percentage of the retail sale as negotiated with the digital product publisher. We recognize the sale of these digital products on a net basis, whereby the commissions earned are recorded as revenue.

Loyalty Program

Our loyalty program accounting policy discussed below is subsequent to the adoption of ASU 2014-09. See “—Recently Adopted Accounting Pronouncements” for information regarding our loyalty program accounting policy prior to the adoption of ASU 2014-09.

Our PowerUp Rewards loyalty program allows members to earn points on purchases that can be redeemed for rewards that include discounts or merchandise. When loyalty program members purchase our product, we allocate the transaction price between the product and loyalty points earned based on the relative stand-alone selling prices and expected point redemption. The portion allocated to the loyalty points is initially recorded as deferred revenue and subsequently recognized as revenue upon redemption or expiration.

The two primary estimates utilized to record the deferred revenue for loyalty points earned by members are the estimated retail price per point and estimated breakage. The estimated retail price per point is based on the actual historical retail prices of product purchased through the redemption of loyalty points. We estimate breakage of loyalty points based on historical redemption rates. We continually evaluate our methodology and assumptions based on developments in retail price per point redeemed, redemption patterns and other factors. Changes in the retail price per point and redemption rates have the effect of either increasing or decreasing the deferred revenue liability through current period revenue by an amount estimated to represent the retail value of all points previously earned but not yet redeemed by loyalty program members as of the end of the reporting period. The cost of administering the loyalty program, including program administration fees, program communications and cost of loyalty cards, is recognized in selling, general and administrative expenses.

Customer Liabilities

Our customer liabilities accounting policy discussed below is subsequent to the adoption of ASU 2014-09. See “—Recently Adopted Accounting Pronouncements” for information regarding our customer liabilities accounting policy prior to the adoption of ASU 2014-09.

We establish a liability upon the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards are redeemed. In addition, we recognize breakage in revenue upon redemption and in proportion to historical redemption patterns, regardless of the age of the unused gift cards and merchandise credit liabilities. To the extent that future redemption patterns differ from those historically experienced, there will be variations in the recorded breakage.

Vendor Arrangements

We participate in vendor cooperative advertising programs and other vendor marketing programs in which vendors provide us with cash consideration in exchange for marketing and advertising the vendors’ products. Our accounting for cooperative advertising arrangements and other vendor marketing programs results in a significant portion of the consideration received from our vendors reducing the product costs in inventory rather than as an offset to our marketing and advertising costs. The consideration serving as a reduction in inventory is recognized in cost of sales as inventory is sold. The amount of vendor allowances to be recorded as a reduction of inventory is determined based on the nature of the consideration received and the merchandise inventory to which the consideration relates. We apply a sell-through rate to determine the timing in which the consideration should be recognized in cost of sales. Consideration received that relates to video game products that have not yet been released to the public is deferred as a reduction of inventory.

The cooperative advertising programs and other vendor marketing programs generally cover a period from a few days up to a few weeks and include items such as product catalog advertising, in-store display promotions, internet advertising, co-op print advertising and other programs. The allowance for each event is negotiated with the vendor and requires specific performance by us to be earned. Vendor allowances of $72.5 million, $108.5 million and $143.4 million were recorded as a reduction of cost of sales for fiscal 2020, 2019 and 2018, respectively.

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GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cost of Sales and Selling, General and Administrative Expenses Classification

The classification of cost of sales and selling, general and administrative expenses ("SG&A") varies across the retail industry. We include certain purchasing, receiving and distribution costs in SG&A in the consolidated statements of operations. We include processing fees associated with purchases made by credit cards and other payment methods in cost of sales in the consolidated statements of operations.

Advertising Expenses

We expense advertising costs for television, newspapers and other media when the advertising takes place. Advertising expenses for fiscal 2020, 2019 and 2018 totaled $58.4 million, $66.7 million and $72.9 million, respectively.

Income Taxes

Income tax expense includes federal, state, local and international income taxes. Income taxes are accounted for utilizing an asset and liability approach and deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities using enacted tax rates. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with GAAP, we maintain liabilities for uncertain tax positions until examination of the tax year is completed by the applicable taxing authority, available review periods expire or additional facts and circumstances cause us to change our assessment of the appropriate accrual amount. See Note 9, "Income Taxes," for additional information.

Effective January 30, 2021, with the exception of our operations in New Zealand, we will no longer assert indefinite reinvestment of the undistributed earnings of our foreign subsidiaries. However, income tax and/or withholding tax associated with any amounts available for distribution as of January 30, 2021 is not expected to be material to our financial statements.

Leases

We conduct the substantial majority of our business with leased real estate properties, including retail stores, warehouse facilities and office space. We also lease certain equipment and vehicles. These are generally leased under noncancelable agreements and include various renewal options for additional periods. These agreements generally provide for minimum, and in some cases, percentage rentals, and require us to pay insurance, taxes and other maintenance costs. Percentage rentals are based on sales performance in excess of specified minimums at various stores and are accounted for in the period in which the amount of percentage rentals can be accurately estimated. All of our lease agreements are classified as operating leases.

Effective February 3, 2019, we adopted Accounting Standards Codification Topic 842, Leases ("ASC 842"). Under ASC 842, fixed payments associated with our operating leases are included in operating lease right-of-use ("ROU") assets and both current and noncurrent operating lease liabilities on the balance sheet. We determine if an arrangement is considered a lease at inception. We recognize ROU assets, on the commencement date based on the present value of future minimum lease payments over the lease term, including reasonably certain renewal options. As the rate implicit in the lease is not readily determinable for most leases, we utilize our incremental borrowing rate ("IBR") to determine the present value of future payments. The incremental borrowing rate represents a significant judgment that is based on an analysis of our credit rating, country risk, corporate bond yields and the effect of collateralization. For our real estate leases, we do not separate the components of a contract, thus our future payments include minimum rent payments and fixed executory costs. For our non-real estate leases, future payments include only fixed minimum rent payments. We record the amortization of our ROU assets and the accretion of our lease liabilities as a single lease cost on a straight-line basis over the lease term, which includes option terms we are reasonably certain to exercise. We recognize our cash or lease incentives as a reduction to the ROU asset. We assess ROU assets for impairment in accordance with our long-lived asset impairment policy, which is performed periodically or when events or changes in circumstances indicate that the carrying amount may not be recoverable.

Prior to our adoption of ASC 842, liabilities for future rental payments for operating leases were not recognized on the balance sheet. Leases with step rent provisions, escalation clauses or other lease concessions were accounted for on a straight-line basis over the lease term, which included renewal option periods when we were reasonably assured of exercising the renewal options and included “rent holidays” (periods in which we were not obligated to pay rent). Cash or lease incentives received upon entering into certain store leases (“tenant improvement allowances”) were also recognized on a straight-line basis as a reduction to rent expense over the lease term. We recorded the unamortized portion of tenant improvement allowances as a part of deferred rent.

F-13

GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency

Generally, we have determined that the functional currencies of our foreign subsidiaries are the subsidiaries’ local currencies. The assets and liabilities of the subsidiaries are translated at the applicable exchange rate as of the end of the balance sheet date and revenue and expenses are translated at an average rate over the period. Currency translation adjustments are recorded as a component of other comprehensive income. Currency translation adjustments related to divested foreign businesses are reclassified into earnings as a component of SG&A in our consolidated statements of operations once the liquidation of the respective foreign businesses is substantially complete.

Transaction gains and losses arising from transactions denominated in foreign currencies as well as derivatives resulted in net losses of $1.0 million in fiscal 2020 and a net gain of $1.0 million and $3.0 million in fiscal 2019 and 2018, respectively, and are included in SG&A expenses in the Consolidated Statements of Operations. Foreign currency transaction gains and losses are the result of decreases or increases in the value of the U.S. dollar compared to the functional currencies of the countries in which we operate internationally.

We use forward exchange contracts to manage currency risk primarily related to foreign-currency denominated intercompany assets and liabilities. The forward exchange contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the re-measurement of related intercompany loans. See Note 6, "Fair Value Measurements and Financial Instruments," for additional information regarding our forward exchange contracts.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was further updated and clarified by the FASB through the issuance of additional related ASUs. This ASU requires financial assets measured at amortized cost to be presented at the net amount to be collected with the recognition of an allowance for credit losses expected to be incurred over an asset's lifetime based on relevant information about past events, current conditions and reasonable and supportable forecasts. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this new standard, effective February 2, 2020, using the modified-retrospective approach. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") 2016-02, Leases, which requires a lessee to recognize a liability related to lease payments and a corresponding right-of-use asset representing a right to use the underlying asset for the lease term. Entities are required to use a modified retrospective transition approach for leases that exist or are entered into after the beginning of the earliest comparative period presented in the financial statements, with certain reliefs available. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides clarifications and improvements to ASU 2016-02 including allowing entities to elect an additional transition method with which to adopt ASU 2016-02.

The approved transition method enables entities to apply the transition requirements in this ASU at the effective date of ASU 2016-02 (rather than at the beginning of the earliest comparative period presented) with the effect of initially applying ASU 2016-02 recognized as a cumulative-effect adjustment to retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with Accounting Standard Codification Topic 840, Leases (“ASC 840”), including the disclosure requirements of ASC 840. In March 2019, the FASB issued ASU 2019-01, Leases which clarifies the disclosure requirements for interim periods.

We adopted the new lease standard, ASC 842, effective February 3, 2019, using the modified-retrospective transition approach as outlined in ASU 2018-11, with no restatement of comparative periods. As permitted by the standard, we elected certain practical expedients, including the "package of practical expedients," under which we did not reassess our prior conclusions regarding lease identification, lease classification, or capitalization of initial lease direct costs for existing or expired contracts. For our real estate leases, we elected the practical expedient to not separate lease and non-lease components. For our non-real estate leases, we elected to separate lease and non-lease components. We did not elect to exclude short-term leases from our right-of-use asset and liability balances, nor did we elect the hindsight practical expedient.

Under the modified-retrospective transition approach, we have recorded adjustments to our fiscal 2019 opening balance sheet (as of February 3, 2019) to recognize an initial operating lease right-of-use asset and corresponding initial lease liability of approximately $850 million. See Note 11, "Leases," for further details.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which sets forth a new five-step revenue recognition model that replaces the prior revenue recognition guidance in its entirety. In 2016, the FASB issued several ASUs that further amended the new revenue standard in the areas of principal versus agent evaluation, licenses of intellectual property, identifying performance obligations, and other clarifications and technical corrections. The underlying principle of the new standard is that an entity will recognize revenue to depict the transfer of promised goods or services to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

customers in an amount that reflects what it expects in exchange for the goods or services. The updated standard also requires additional disclosures on the nature, timing, and uncertainty of revenue and related cash flows. We adopted the new revenue standard on the first day of fiscal year 2018, effective February 4, 2018, by utilizing the modified retrospective transition approach.

The new revenue standard primarily impacted the accounting of our PowerUp Rewards loyalty program and the recognition of breakage associated with our gift cards liability. For our loyalty program, we previously estimated the net cost of the rewards that were issued and recorded this cost (presented as cost of sales) and the associated balance sheet liability as points were accumulated by our loyalty program members. Under the new standard, the transaction price is allocated between the product(s) and loyalty points earned based on the relative stand-alone selling prices and expected point redemption. The portion allocated to the loyalty points is initially recorded as deferred revenue and subsequently recognized as revenue upon redemption or expiration. For our gift cards liability, estimated breakage on unused gift cards and merchandise credit liabilities was previously recognized on a quarterly basis (recorded to cost of sales) to the extent that we believed the likelihood of redemption was remote, generally for balances older than two years.

Under the new standard, we recognize breakage in revenue upon redemption and in proportion to historical redemption patterns, regardless of the age of the unused gift cards and merchandise credit liabilities. In addition, the new revenue standard requires presentation of our sales return reserve to be on a gross basis, consisting of a separate right of return asset and liability. The adoption of the new standard resulted in expanded revenue recognition disclosures which are included below in Note 4, “Revenue.”

The impact of the new revenue standard to our statements of operations for fiscal 2018 is as follows (in millions):

Under Prior Standard Impact of New Standard As Reported

Operating (loss) from continuing operations (706.5) 4.5 (702.0)

(Loss) from continuing operations before income taxes (757.6) 4.5 (753.1)

Net (loss) from continuing operations (798.1) 3.3 (794.8)

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard is intended to simplify the accounting and disclosure requirements for income taxes by eliminating various exceptions in accounting for income taxes as well as clarifying and amending existing guidance to improve consistency in application of ASC 740. The provisions of ASU 2019-12 are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The company is currently evaluating the impact that ASU 2019-12 will have on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides practical expedients for contract modifications with the transition from reference rates, such as LIBOR, that are expected to be discontinued. This guidance is applicable for the Company's revolving line of credit, which uses LIBOR as a reference rate. The provisions of ASU 2020-04 are effective as of March 12, 2020 and may be adopted prospectively through December 31, 2022. The Company is currently evaluating the impact that ASU 2020-04 will have on its consolidated financial statements.

2. Discontinued Operations and Dispositions

On January 16, 2019, we completed the sale of all of the equity interests in our wholly owned subsidiary Spring Communications Holding, Inc. ("Spring Mobile") to Prime Acquisition Company, LLC ("Prime"), a wholly owned subsidiary of Prime Communications, L.P., pursuant to an Equity Purchase Agreement dated as of November 21, 2018. The historic results of Spring Mobile, including the gain on sale, are presented as discontinued operations.

The results of our discontinued operations for fiscal 2020, 2019 and 2018 are as follows (in millions):

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Fiscal Year

Net Sales $ — $ — $ 565.4

Cost of Sales — — 73.1

Gross Profit — — 492.3

Selling general and administrative expenses 1.3 3.6 416.0

Operating (loss) earnings (1.3) (3.6) 76.3

(Loss) gain on sale of discontinued operations — (5.5) 100.8

Income tax (benefit) expense (0.6) (2.6) 55.3

Net (loss) income from discontinued operations $ (0.7) $ (6.5) $ 121.8

The consolidated statement of cash flows is presented on a combined basis for all periods presented, therefore, does not segregate cash flows from continuing and discontinued operations. There were no significant operating noncash items for our discontinued operations for fiscal 2019 and 2020. The following table presents capital expenditures, depreciation and amortization and other significant operating noncash items of our discontinued operations for fiscal 2018 (in millions):

Fiscal Year

Capital expenditures $ 7.5

Depreciation and amortization 20.1

Provision for inventory reserves 12.7

Divestiture of Simply Mac

On May 9, 2019, we entered into a definitive agreement to sell our Simply Mac business to Cool Holdings, Inc., which closed on September 25, 2019, for total consideration of $12.9 million. The consideration received was subject to customary post-closing adjustments and consisted of $5.2 million in cash and a note receivable of $7.7 million, which was amended in the first quarter of fiscal 2020 to revise the amount to $1.3 million. We fully reserved the $7.7 million note receivable in the fourth quarter of fiscal 2019 due to the buyer's failure to make scheduled payments. We recognized a loss on sale of $9.1 million, net of tax, during fiscal 2019.

3. COVID-19 Impacts

The near-term macroeconomic conditions continue to be adversely impacted by the emergence of a novel coronavirus, identified as COVID-19, which was declared a global pandemic by the World Health Organization in March 2020. In efforts to mitigate the continued spread of the virus, numerous governments in geographies where the Company operates have imposed quarantines, stay-at-home orders, travel restrictions and other similar measures in attempts to limit physical human interaction, referred to as social distancing. To comply with these measures, the Company temporarily closed or limited store operations across all of its operating regions at various times throughout fiscal 2020 to date.

During the first half of 2020, the Company temporarily closed stores at various times across Europe, Canada and New Zealand. In the United States, all storefronts were temporarily closed to customers, however, we continued to process orders by offering curbside pick-up, ship from store and e-commerce delivery options in many of our stores. These temporary store closures began in late March 2020 and by the end of June 2020, 98% of our stores globally were open to the public following the implementation of the highest level of health and safety protocols recommended by the federal and local health and governmental authorities. Our store locations in Australia remained opened to the public during the first half of fiscal 2020 and were not negatively impacted during this period by the COVID-19 restrictions as our other segments and New Zealand were impacted. During the third quarter of fiscal 2020, the substantial majority of our stores were open, with approximately 15% of our stores in Australia temporarily closed for approximately four weeks due to an outbreak of COVID-19.

Additionally, beginning in late October 2020 and continuing throughout the fiscal fourth quarter, as COVID-19 cases began to escalate in regions around the world, certain of our stores across Europe, Canada and Australia began more long-term or fluctuating temporary closures as required by the various governmental authorities. Although certain stores remained closed during this time, some of our stores in France, Ireland, Canada and Australia offered and some continue to offer curbside pick-up. We remain vigilant in our compliance with COVID-19 regulations across our operating regions. In late December 2020 and

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extending through the end of fiscal 2020, we experienced an increase in temporary store closures in all but the Australian segment, with certain jurisdictions in Canada, US, and Europe allowing for curbside pickup

Impact on Operating Results and Asset Recoverability

While the gaming industry has not been as severely impacted as certain other consumer businesses, store closures during the stay-at-home orders have adversely impacted our results of operations during fiscal 2020. In response, we have taken proactive measures to align inventory purchases with demand, reduce discretionary spending and earlier in fiscal 2020 instituted temporary pay reductions to partially offset the impact of store closures.

During fiscal 2020, we incurred approximately $25 million in costs to mitigate the impact of the COVID-19 pandemic including costs related to incremental wage payments to hourly associates to help offset lost wages due to store closures, enhanced cleaning measures and expanded use of personal protective equipment at our stores, shared service centers and distribution centers across all geographies where we operate.

The aggregation of these events caused us to reassess potential impairments of long-lived assets, primarily consisting of store-level property and equipment and right-of-use assets under existing operating leases. As a result of this asset impairment analysis, during fiscal 2020 we recognized impairment charges totaling $11.2 million, consisting of a $7.2 million impairment for store-level property and equipment, $2.9 million impairment for store-level ROU assets, and $1.1 million impairment for definite-lived intangible assets. In addition, during fiscal 2020, we recognized impairment charges of $3.2 million for our corporate aircraft, which was partially attributable to the economic impacts associated with the COVID-19 pandemic. Our corporate aircraft was sold during the second quarter of fiscal 2020 for $8.6 million, net of costs to sell. See Note 1, "Nature of Operations and Summary of Significant Accounting Policies" for further details.

During fiscal 2020, we continued to assess the likelihood of realizing the benefits of our deferred tax assets. We assess the realizability of our deferred tax assets using several factors, including the weight of all available evidence, which takes into consideration cumulative book losses recognized, projections of future taxable income in certain jurisdictions and other factors. While our view of the longer-term operating outlook has not been significantly impacted by COVID-19, our ability to recover these deferred tax assets depends on several factors, including our short and long-term results of operations. As a result of this analysis, we maintain valuation allowances of approximately $225.7 million on all of our U.S. and foreign net deferred tax assets as of January 30, 2021.

We evaluated our accounts receivables, which are mainly comprised of bankcard receivables and vendor allowances. Given the nature of these receivables and the credit worthiness of the applicable payees, the COVID-19 pandemic did not significantly impact the estimates of allowances for doubtful accounts.

We also evaluated our merchandise inventories, which are carried at the lower of cost or market generally using the average cost method. We are required to record valuation adjustments to inventory to reflect potential obsolescence or over-valuation as a result of cost exceeding market. In valuing inventory, we consider the quantities on hand, recent sales, potential price protections, returns to vendors and other factors. Given the nature of our products, our inventory management efforts and the temporary nature of store closures, the COVID-19 pandemic did not significantly impact the estimates of inventory valuation.

Liquidity and Other Impacts

As of January 30, 2021, we had total unrestricted cash on hand of $508.5 million, $126.5 million of restricted cash and an additional $88.4 million of available borrowing capacity under our revolving credit facility. On March 15, 2021, we repaid our outstanding borrowings of $25.0 million under the Revolver. See Note 12, "Debt," for further information. As mentioned above, we have taken actions to align expenses and inventory levels given the impacts of the current operating environment and have projected we will have adequate liquidity for the next 12 months and the foreseeable future to maintain normal operations. Additionally, during the second quarter of fiscal 2020, we completed an exchange offer for a portion of our unsecured 2021 Senior Notes resulting in the replacement of 52% of such 2021 Senior Notes (based on aggregate principal amount) for newly issued 2023 Senior Notes. Through fiscal 2020, we have repaid $131.8 million aggregate principal amount of our 2021 Senior Notes through a combination of open market purchases and redemptions. The remaining $73.2 million aggregate principal amount of our 2021 Senior Notes was redeemed subsequent to year-end on March 15, 2021. See Note 12, "Debt," for further details on the exchange offer and related impacts to scheduled debt maturities.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which among other things, provides employer payroll tax credits for wages paid to associates who are unable to work during the COVID-19 pandemic and options to defer the employer portion of Social Security payroll taxes incurred through the end of calendar year 2020. We qualified for the deferral of Social Security payroll taxes and, as a result, we have deferred, and continued to defer payroll taxes and other tax payments through the end of the calendar year 2020. The payment of these deferred amounts are required to be made in 2021 and 2022 calendar years. These deferrals are included in accrued liabilities and other current liabilities within our consolidated balance sheets. In addition, our French subsidiary obtained €20.0 million of unsecured term loans in the second quarter of fiscal 2020 and another €20.0 million of unsecured term loans in the third

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

quarter of fiscal 2020, 90% of which are guaranteed by the French government pursuant to a state guaranteed loan program instituted in connection with the COVID-19 pandemic. See Note 12, "Debt" for further information.

During fiscal 2020, we received approximately $27 million, of COVID-19-related rent concessions comprised of rent abatements and rent deferrals. We applied lease modification guidance to any concession arrangement that extended the term of the lease and substantially altered future cash flows. We elected, as permitted by the guidance issued by the FASB during the COVID-19 pandemic, to not use lease modification accounting for all rent concessions including any rent abatements related to leases not subject to an extension of the original terms. For these leases, which represented most of the leases subject to COVID-19-related rent concessions, we reduced rent expense in the later of the month in which the landlord issued the rent concession or the month for which the rent concession related. For rent concessions in the form of lease payment deferrals, the liability for these rent amounts will remain on the balance sheet until paid.

The COVID-19 pandemic remains an evolving situation and its impact on our business, operating results, cash flows and financial conditions will depend on the geographies impacted by the virus, the ongoing economic effect of the pandemic, the additional economic stimulus programs introduced by governments, and the timing of the post-pandemic economic recovery. Even as we continue to comply with all governmental health and safety requirements for our associates and customers while resuming and maintaining substantially full operations, the persistence and potential resurgence of the COVID-19 pandemic may require us to temporarily close stores again in future periods or introduce modified operating schedules and may impact customer behaviors, including a potential reduction in consumer discretionary spending. These developments could increase asset recovery and valuation risks. Further, the uncertainties in the global economy could impact the financial viability of the our suppliers, which may interrupt our supply chain and require other changes to operations. In light of the foregoing, the extent and duration of the COVID-19 pandemic, and responses of governments, customers, suppliers and other third parties, may materially adversely impact our business, financial condition, results of operations and cash flows.

4. Revenue

Net sales by significant product category for the periods indicated is as follows (in millions):

Fiscal Year

___________________

(1) Includes sales of new and pre-owned hardware, accessories, hardware bundles in which hardware and digital or physical software are sold together in a single SKU, interactive game figures, strategy guides, mobile and consumer electronics, and the operations of our Simply Mac stores, which were sold in September 2019.

(2) Includes sales of new and pre-owned video game software, digital software and PC entertainment software.

See Note 17, "Segment Information," for net sales by geographic location.

Performance Obligations

We have arrangements with customers where our performance obligations are satisfied over time, which primarily relate to extended warranties and our Game Informer magazine. Revenues do not include sales taxes or other taxes collected from customers. We expect to recognize revenue in future periods for remaining performance obligations we have associated with unredeemed gift cards, trade-in credits, reservation deposits and our PowerUp Rewards loyalty program (collectively, “unredeemed customer liabilities”), extended warranties and subscriptions to our Game Informer magazine.

Performance obligations associated with unredeemed customer liabilities are primarily satisfied at the time our customers redeem their gift cards, trade-in credits, reservation deposits or loyalty program points for products that we offer. Unredeemed customer liabilities are generally redeemed within one year of issuance. As of January 30, 2021 and February 1, 2020, our unredeemed customer liabilities totaled $244.1 million and $226.9 million, respectively.

We offer extended warranties on certain new and pre-owned video game products with terms generally ranging from 12 to 24 months, depending on the product. Revenues for extended warranties sold are recognized on a straight-line basis over the life of the contract. As of January 30, 2021 and February 1, 2020, our deferred revenue liability related to extended warranties totaled $65.1 million and $70.0 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Performance obligations associated with subscriptions to our Game Informer magazine are satisfied when magazines are delivered in print form or when made available in digital format. As of January 30, 2021 and February 1, 2020, we had deferred revenue of $39.0 million and $42.3 million, respectively, associated with our Game Informer magazine.

Significant Judgments and Estimates

GME US Equity

GME · 10-K · period ended 2021-01-30

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE*

ITEM 11. EXECUTIVE COMPENSATION*

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS*

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE*

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES*

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

ITEM 16. FORM 10-K SUMMARY

GME US Equity☆

GME · 10-K · period ended 2021-01-30

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE*

ITEM 11. EXECUTIVE COMPENSATION*

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS*

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE*

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES*

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

ITEM 16. FORM 10-K SUMMARY

GME US Equity