UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 Form 10-Q

 ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 202030, 2021

OR
OR
 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-32637
gme-20211030_g1.jpg
GameStop Corp.
(Exact name of registrant as specified in its charter)
Delaware 20-2733559
(State or other jurisdiction of
incorporation or organization)
gme-20201031_g1.jpg
(I.R.S. Employer
Identification No.)
625 Westport Parkway76051
Grapevine,Texas
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:
(817) 424-2000

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common StockGMENYSE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer☐Accelerated filer☒Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of $.001 par value Class A Common Stock outstanding as of December 1, 2020: 69,746,9602021: 76,350,781


TABLE OF CONTENTS 
Part I — FINANCIAL INFORMATION
Page No.
Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II — OTHER INFORMATION
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Item 1A.
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Item 2.
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Item 3.
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Table of Contents
PART I — FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
GAMESTOP CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value per share)
October 31,
2020		November 2,
2019		February 1,
2020
ASSETS
Current assets:
Cash and cash equivalents$445.9 $290.3 $499.4 
Restricted cash140.7 0.3 0.3 
Receivables, net77.6 145.7 141.9 
Merchandise inventories, net861.0 1,286.7 859.7 
Prepaid expenses and other current assets126.7 127.3 120.6 
Assets held-for-sale0 12.8 11.8 
Total current assets1,651.9 1,863.1 1,633.7 
Property and equipment, net193.0 287.1 275.9 
Operating lease right-of-use assets666.7 758.1 767.0 
Deferred income taxes29.2 157.8 83.0 
Long-term restricted cash16.0 13.8 13.8 
Other noncurrent assets44.6 65.7 46.3 
Total assets$2,601.4 $3,145.6 $2,819.7 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$440.2 $709.9 $380.8 
Accrued liabilities and other current liabilities654.1 625.1 617.5 
Current portion of operating lease liabilities212.9 238.5 239.4 
Short-term debt, including current portion of long-term debt, net244.5 0 0 
Borrowings under revolving line of credit25.0 0 0 
Total current liabilities1,576.7 1,573.5 1,237.7 
Long-term debt, net216.0 419.4 419.8 
Operating lease liabilities456.7 516.5 529.3 
Other long-term liabilities19.8 19.1 21.4 
Total liabilities2,269.2 2,528.5 2,208.2 
Commitments and contingencies (Note 7)
Stockholders’ equity:
Class A common stock — $.001 par value; 300 shares authorized; 65.2, 67.9 and 64.3 shares issued and outstanding0.1 0.1 0.1 
Additional paid-in capital5.1 0 0 
Accumulated other comprehensive loss(67.4)(71.5)(78.8)
Retained earnings394.4 688.5 690.2 
Total stockholders’ equity332.2 617.1 611.5 
Total liabilities and stockholders’ equity$2,601.4 $3,145.6 $2,819.7 
(unaudited)










See accompanying notes to unaudited condensed consolidated financial statements.
1
Table of Contents
GAMESTOP CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
 13 Weeks Ended39 Weeks Ended
 October 31,
2020		November 2,
2019		October 31,
2020		November 2,
2019
Net sales$1,004.7 $1,438.5 $2,967.7 $4,271.9 
Cost of sales728.4 997.4 2,156.8 2,960.5 
Gross profit276.3 441.1 810.9 1,311.4 
Selling, general and administrative expenses360.4 475.4 1,095.1 1,411.0 
Goodwill and asset impairments0 11.3 4.8 375.2 
Gain on sale of assets(21.1)0 (32.4)0 
Operating loss(63.0)(45.6)(256.6)(474.8)
Interest income(0.3)(2.0)(1.6)(9.9)
Interest expense10.0 8.0 25.5 30.6 
Loss from continuing operations before income taxes(72.7)(51.6)(280.5)(495.5)
Income tax (benefit) expense(53.9)31.6 14.4 (6.2)
Net loss from continuing operations(18.8)(83.2)(294.9)(489.3)
Loss from discontinued operations, net of tax0 (0.2)(0.9)(2.6)
Net loss$(18.8)$(83.4)$(295.8)$(491.9)
Basic loss per share:
Continuing operations$(0.29)$(1.01)$(4.54)$(5.16)
Discontinued operations0 0 (0.01)(0.03)
Basic loss per share$(0.29)$(1.02)$(4.56)$(5.19)
Diluted loss per share:
Continuing operations$(0.29)$(1.01)$(4.54)$(5.16)
Discontinued operations0 0 (0.01)(0.03)
Diluted loss per share$(0.29)$(1.02)$(4.56)$(5.19)
Weighted-average shares outstanding:
Basic65.2 82.1 64.9 94.8 
Diluted65.2 82.1 64.9 94.8 





October 30,
2021		October 31,
2020		January 30,
2021
ASSETS
Current assets:
Cash and cash equivalents$1,413.0 $445.9 $508.5 
Restricted cash39.5 140.7 110.0 
Receivables, net83.4 77.6 105.3 
Merchandise inventories1,140.9 861.0 602.5 
Prepaid expenses and other current assets236.3 126.7 224.9 
Total current assets2,913.1 1,651.9 1,551.2 
Property and equipment, net of accumulated depreciation of $1,122.0, $1,175.3 and $1,117.7, respectively179.6 193.0 201.2 
Operating lease right-of-use assets615.8 666.7 662.1 
Deferred income taxes— 29.2 — 
Long-term restricted cash15.6 16.0 16.5 
Other noncurrent assets37.9 44.6 41.6 
Total assets$3,762.0 $2,601.4 $2,472.6 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$711.5 $440.2 $341.8 
Accrued liabilities and other current liabilities608.5 654.1 626.8 
Current portion of operating lease liabilities211.9 212.9 227.4 
Short-term debt, including current portion of long-term debt, net1.4 244.5 121.7 
Borrowings under revolving line of credit— 25.0 25.0 
Total current liabilities1,533.3 1,576.7 1,342.7 
Long-term debt, net44.8 216.0 216.0 
Operating lease liabilities409.7 456.7 456.7 
Other long-term liabilities19.3 19.8 20.5 
Total liabilities2,007.1 2,269.2 2,035.9 
Stockholders’ equity:
Class A common stock — $.001 par value; 300 shares authorized; 75.9, 65.2 and 65.3 shares issued and outstanding, respectively0.1 0.1 0.1 
Additional paid-in capital1,567.9 5.1 11.0 
Accumulated other comprehensive loss(54.2)(67.4)(49.3)
Retained earnings241.1 394.4 474.9 
Total stockholders’ equity1,754.9 332.2 436.7 
Total liabilities and stockholders’ equity$3,762.0 $2,601.4 $2,472.6 













See accompanying notes to unaudited condensed consolidated financial statements.
21
Table of Contents
GAMESTOP CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSOPERATIONS
(in millions)
 13 Weeks Ended39 Weeks Ended
 October 31,
2020		November 2,
2019		October 31,
2020		November 2,
2019
Net loss$(18.8)$(83.4)$(295.8)$(491.9)
Other comprehensive (loss) income:
Foreign currency translation adjustment(3.5)3.6 11.4 (17.2)
Total comprehensive loss$(22.3)$(79.8)$(284.4)$(509.1)
millions, except per share data)

(unaudited)



























 Three Months EndedNine Months Ended
 October 30,
2021		October 31,
2020		October 30,
2021		October 31,
2020
Net sales$1,296.6 $1,004.7 $3,756.8 $2,967.7 
Cost of sales978.0 728.4 2,787.2 2,156.8 
Gross profit318.6 276.3 969.6 810.9 
Selling, general and administrative expenses421.5 360.4 1,170.7 1,095.1 
Asset impairments— — 0.6 4.8 
Gain on sale of assets— (21.1)— (32.4)
Operating loss(102.9)(63.0)(201.7)(256.6)
Interest income— (0.3)(0.2)(1.6)
Interest expense0.8 10.0 26.2 25.5 
Loss from continuing operations before income taxes(103.7)(72.7)(227.7)(280.5)
Income tax expense (benefit)1.7 (53.9)6.1 14.4 
Net loss from continuing operations(105.4)(18.8)(233.8)(294.9)
Loss from discontinued operations, net of tax— — — (0.9)
Net loss$(105.4)$(18.8)$(233.8)$(295.8)
Basic loss per share:
Continuing operations$(1.39)$(0.29)$(3.27)$(4.54)
Discontinued operations— — — (0.01)
Basic loss per share$(1.39)$(0.29)$(3.27)$(4.56)
Diluted loss per share:
Continuing operations$(1.39)$(0.29)$(3.27)$(4.54)
Discontinued operations— — — (0.01)
Diluted loss per share$(1.39)$(0.29)$(3.27)$(4.56)
Weighted-average shares outstanding:
Basic75.9 65.2 71.5 64.9 
Diluted75.9 65.2 71.5 64.9 




















See accompanying notes to unaudited condensedconsolidated financial statements.
2
Table of Contents
GAMESTOP CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
(unaudited)
 Three Months EndedNine Months Ended
 October 30,
2021		October 31,
2020		October 30,
2021		October 31,
2020
Net loss$(105.4)$(18.8)$(233.8)$(295.8)
Other comprehensive income (loss):
Foreign currency translation adjustment2.1 (3.5)(4.9)11.4 
Total comprehensive loss$(103.3)$(22.3)$(238.7)$(284.4)



See accompanying notes to consolidated financial statements.
3
Table of Contents
GAMESTOP CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYCASH FLOWS
(in millions, except for per share data)millions)
(unaudited)
 Nine Months Ended
October 30,
2021		October 31,
2020
Cash flows from operating activities:
Net loss$(233.8)$(295.8)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization53.2 61.1 
Loss (gain) on retirement of debt18.2 (1.5)
Asset impairments0.6 4.8 
Stock-based compensation expense20.7 6.1 
Deferred income taxes— 45.4 
Loss (gain) on disposal of property and equipment, net1.9 (30.6)
Other, net(1.4)4.1 
Changes in operating assets and liabilities:
Receivables, net21.0 65.8 
Merchandise inventories(545.2)11.6 
Prepaid expenses and other current assets(5.1)(2.9)
Prepaid income taxes and income taxes payable(12.9)11.7 
Accounts payable and accrued liabilities376.9 78.9 
Operating lease right-of-use assets and lease liabilities(18.1)1.1 
Changes in other long-term liabilities— (0.9)
Net cash flows used in operating activities(324.0)(41.1)
Cash flows from investing activities:
Capital expenditures(40.7)(32.6)
Proceeds from sale of property and equipment— 95.5 
Other(0.4)0.4 
Net cash flows (used in) provided by investing activities(41.1)63.3 
Cash flows from financing activities:
Proceeds from issuance of common stock, net of costs1,672.8 — 
Proceeds from French term loans— 47.1 
Borrowings from the revolver— 150.0 
Repayments of revolver borrowings(25.0)(125.0)
Payments of senior notes(307.4)(5.3)
Settlement of stock-based awards(136.6)(1.0)
Other(0.1)(0.3)
Net cash flows provided by financing activities1,203.7 65.5 
Exchange rate effect on cash, cash equivalents and restricted cash(5.5)1.4 
Increase in cash, cash equivalents and restricted cash833.1 89.1 
Cash, cash equivalents and restricted cash at beginning of period635.0 513.5 
Cash, cash equivalents and restricted cash at end of period$1,468.1 $602.6 

 Class A
Common Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
(Loss) Income		Retained
Earnings		Total
Stockholders'
Equity
 SharesAmount
Balance at February 1, 202064.3 $0.1 $0 $(78.8)$690.2 $611.5 
Net loss— — — — (165.7)(165.7)
Foreign currency translation— — — (12.1)— (12.1)
Stock-based compensation expense— — 1.8 — — 1.8 
Settlement of stock-based awards0.3 — (0.5)— — (0.5)
Balance at May 2, 202064.6 $0.1 $1.3 $(90.9)$524.5 $435.0 
Net loss— — — — (111.3)(111.3)
Foreign currency translation— — — 27.0 — 27.0 
Stock-based compensation expense— — 2.1 — — 2.1 
Settlement of stock-based awards0.6 — (0.5)— — (0.5)
Balance at August 1, 202065.2 $0.1 $2.9 $(63.9)$413.2 $352.3 
Net loss— — — — (18.8)(18.8)
Foreign currency translation— — — (3.5)— (3.5)
Stock-based compensation expense— — 2.2 — — 2.2 
Balance at October 31, 202065.2 $0.1 $5.1 $(67.4)$394.4 $332.2 


 Class A
Common Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
(Loss) Income		Retained
Earnings		Total
Stockholders'
Equity
 SharesAmount
Balance at February 2, 2019102.0 $0.1 $27.7 $(54.3)$1,362.7 $1,336.2 
Net income— — — — 6.8 6.8 
Foreign currency translation— — — (13.9)— (13.9)
Dividends declared, $0.38 per common share— — — — (38.7)(38.7)
Stock-based compensation expense— — 1.9 — — 1.9 
Settlement of stock-based awards0.3 — (0.6)— — (0.6)
Balance at May 4, 2019102.3 $0.1 $29.0 $(68.2)$1,330.8 $1,291.7 
Net loss— — — — (415.3)(415.3)
Foreign currency translation— — — (6.9)— (6.9)
Stock-based compensation expense— — 3.3 — — 3.3 
Repurchase of common shares(12.0)— (32.1)— (30.8)(62.9)
Settlement of stock-based awards0.2 — (0.2)— — (0.2)
Balance at August 3, 201990.5 $0.1 $0 $(75.1)$884.7 $809.7 
Net loss— — — — (83.4)(83.4)
Foreign currency translation— — — 3.6 — 3.6 
Stock-based compensation expense— — 2.9 — — 2.9 
Repurchase of common shares(22.6)— (2.9)— (112.8)(115.7)
Balance at November 2, 201967.9 $0.1 $0 $(71.5)$688.5 $617.1 









See accompanying notes to unaudited condensed consolidated financial statements.
4
Table of Contents
GAMESTOP CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY
(in millions)millions, except for per share data)
 39 Weeks Ended
 October 31,
2020		November 2,
2019
Cash flows from operating activities:
Net loss$(295.8)$(491.9)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization (including amounts in cost of sales)61.1 70.1 
Goodwill and asset impairments4.8 375.2 
Stock-based compensation expense6.1 8.1 
Deferred income taxes45.4 (11.8)
(Gain) loss on disposal of property and equipment, net(30.6)1.9 
Loss on divestitures0 1.3 
Other2.6 3.1 
Changes in operating assets and liabilities:
Receivables, net65.8 (6.7)
Merchandise inventories11.6 (61.6)
Prepaid expenses and other current assets(2.9)(10.7)
Prepaid income taxes and income taxes payable11.7 (44.2)
Accounts payable and accrued liabilities78.9 (488.4)
Operating lease right-of-use assets and lease liabilities1.1 0.7 
Changes in other long-term liabilities(0.9)0.1 
Net cash flows used in operating activities(41.1)(654.8)
Cash flows from investing activities:
Purchase of property and equipment(32.6)(61.4)
Proceeds from sale of property and equipment95.5 0 
Proceeds from divestitures0 5.2 
Other0.4 (0.7)
Net cash flows provided by (used in) investing activities63.3 (56.9)
Cash flows from financing activities:
Repurchase of common shares0 (176.9)
Proceeds from French term loans47.1 0 
Dividends paid(0.3)(40.5)
Borrowings from the revolver150.0 0 
Repayments of revolver borrowings(125.0)0 
Repayments of senior notes(5.3)(404.5)
Settlement of stock-based awards(1.0)(0.8)
Net cash flows provided by (used in) financing activities65.5 (622.7)
Exchange rate effect on cash, cash equivalents and restricted cash1.4 (1.7)
Increase (decrease) in cash, cash equivalents and restricted cash89.1 (1,336.1)
Cash, cash equivalents and restricted cash at beginning of period513.5 1,640.5 
Cash, cash equivalents and restricted cash at end of period$602.6 $304.4 
(unaudited)
 Class A
Common Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Total
Stockholders'
Equity
 SharesAmount
Balance at January 30, 202165.3 $0.1 $11.0 $(49.3)$474.9 $436.7 
Net loss— — — — (66.8)(66.8)
Issuance of common stock, net of cost3.5 — 551.7 — — 551.7 
Foreign currency translation— — — 2.1 — 2.1 
Stock-based compensation expense— — 5.7 — — 5.7 
Settlement of stock-based awards0.5 — (49.9)— — (49.9)
Balance at May 1, 202169.3 $0.1 $518.5 $(47.2)$408.1 $879.5 
Net loss— — — — (61.6)(61.6)
Issuance of common stock, net of cost5.0 — 1,121.1 — — 1,121.1 
Foreign currency translation— — — (9.1)— (9.1)
Stock-based compensation expense— — 8.8 — — 8.8 
Settlement of stock-based awards1.6 — (86.7)— — (86.7)
Balance at July 31, 202175.9 $0.1 $1,561.7 $(56.3)$346.5 $1,852.0 
Net loss— — — — (105.4)(105.4)
Foreign currency translation— — — 2.1 — 2.1 
Stock-based compensation expense— — 6.2 — — 6.2 
Balance at October 30, 202175.9 $0.1 $1,567.9 $(54.2)$241.1 $1,754.9 

 Class A
Common Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Total
Stockholders'
Equity
 SharesAmount
Balance at February 1, 202064.3 $0.1 $— $(78.8)$690.2 $611.5 
Net loss— — — — (165.7)(165.7)
Foreign currency translation— — — (12.1)— (12.1)
Stock-based compensation expense— — 1.8 — — 1.8 
Settlement of stock-based awards0.3 — (0.5)— — (0.5)
Balance at May 2, 202064.6 $0.1 $1.3 $(90.9)$524.5 $435.0 
Net loss— — — — (111.3)(111.3)
Foreign currency translation— — — 27.0 — 27.0 
Stock-based compensation expense— — 2.1 — — 2.1 
Settlement of stock-based awards0.6 — (0.5)— — (0.5)
Balance at August 1, 202065.2 $0.1 $2.9 $(63.9)$413.2 $352.3 
Net loss— — — — (18.8)(18.8)
Foreign currency translation— — — (3.5)— (3.5)
Stock-based compensation expense— — 2.2 — — 2.2 
Balance at October 31, 202065.2 $0.1 $5.1 $(67.4)$394.4 $332.2 










See accompanying notes to unaudited condensed consolidated financial statements.
5
Table of Contents
GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
(unaudited)
1.    General Information
The Company
GameStop Corp. (“GameStop,” “we,” “us,” “our,” or the “Company”) is a global, multichannel video game, consumer electronicsoffers games, entertainment products and collectibles retailer. GameStop operates over 5,000 stores across 10 countries. GameStop's consumer product network also includes www.gamestop.comtechnology through its e-commerce properties and Game Informer® magazine, the world's leading print and digital video game publication.stores.
GameStop operates itsWe operate our business in 4 geographic segments: United States, Canada, Australia and Europe. The information contained in these unaudited condensedconsolidated financial statements refers to continuing operations unless otherwise noted.
Basis of Presentation and Consolidation
The unaudited condensed consolidated financial statements include the Company'sour accounts and the accounts of itsour wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting only of normal, recurring adjustments) which are, in the Company'sour opinion, necessary for a fair presentation of the information as of and for the periods presented. These unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include allexclude certain disclosures required under GAAP for complete consolidated financial statements.
These unaudited condensedThe accompanying consolidated financial statements and notes are unaudited. The consolidated financial statements should be read in conjunction with the Company's annual reportour Annual Report on Form 10-K for the 52 weeks ended February 1, 2020,January 30, 2021, as filed with the Securities and Exchange Commission ("SEC") on March 27, 2020,23, 2021 (the “2019“2020 Annual Report on Form 10-K”). Due to the seasonal nature of our business, our results of operations for the nine months ended October 30, 2021 are not indicative of our future results for the 52 weeks ending January 29, 2022. Our fiscal year is composed of the 52 or 53 weeks ending on the Saturday closest to the last day of January. Each of our fiscal years ending January 29, 2022 and January 30, 2021 consist of 52 weeks. All three and nine month periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods. Our business, like that of many retailers, is seasonal, with the major portion of the net sales realized during the fourth quarter, which includes the holiday selling season.
UseofEstimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Companyus to make estimates and assumptions that affect the amounts reported amounts ofand disclosed in the consolidated financial statements and accompanying footnotes. We regularly evaluate the estimates related to our 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.expenses. In preparing these consolidated financial statements, the Company haswe have made itsour best estimates and judgments of certain amounts includedrecognized in the consolidated financial statements, and changesgiving due consideration to materiality. Changes in the estimates and assumptions that we have used by the Company could have a significant impact on itsour financial results. Actual results could differ from those estimates. Due to the seasonal nature
2.    Summary of the Company's business, the results of operations for the 39 weeks ended October 31, 2020 are not indicative of the results to be expected for the 52 weeks ending January 30, 2021 ("fiscal 2020").
Reclassifications
The Company has made certain classifications in its consolidated statements of cash flows in order to conform to the current year presentation. Certain changes in customer liabilities, primarily associated with loyalty point redemptions and gift card breakage, of $16.2 million for the 39 weeks ended November 2, 2019 has been reclassified from other to changes in accounts payable and accrued liabilities.
In the Company's consolidated statements of operations, depreciation and amortization of $23.6 million and $69.3 million for the 13 and 39 weeks ended November 2, 2019, respectively, have been reclassified to selling, general and administrative expenses to conform to the current year presentation. Additionally, asset impairments of $11.3 million for the 13 and 39 weeks ended November 2, 2019 and goodwill impairments of $363.9 million for the 39 weeks ended November 2, 2019 have been reclassified to goodwill and asset impairments to conform to the current year presentation.
In the Company's consolidated balance sheets, restricted cash of $0.3 million and $0.3 million as of November 2, 2019 and February 1, 2020, respectively, have 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 and $13.8 million as of November 2, 2019 and February 1, 2020, respectively, have been reclassified from other noncurrent assets to long-term restricted cash to conform to the current year presentation.
Significant Accounting Policies
There have been no material changes to the Company'sour significant accounting policies included in Note 1, "Nature of Operations and Summary of Significant Accounting Policies," within its 2019in the 2020 Annual Report on Form 10-K.
Unvested Restricted Stock and Shares Issued and Outstanding
In June 2019, the Company adopted the GameStop Corp. 2019 Incentive Plan (the "2019 Plan"), which provides for the grant of equity awards to officers, employees, consultants, advisors and directors of the Company. The 2019 Plan provides for the grant of restricted stock awards, including both time-based and performance-based awards, among other equity awards. Time-based
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
restricted stock awards generally vest in equal annual installments over a three-year period on the anniversary of the date of issuance, subject to continued service to the Company. Performance-based restricted stock awards generally vest as a lump sum on the third anniversary of the date of issuance and are subject to the achievement of certain performance measures.
Shares of restricted stock granted by the Company are considered to be legally issued and outstanding as of the date of grant, notwithstanding that the shares remain subject to risk of forfeiture if the vesting conditions for such shares are not met, and are included in the number of shares of Class A common stock outstanding disclosed on the cover page of this quarterly report on Form 10-Q as of December 1, 2020. In accordance with accounting guidance followed by the Company, the financial statement presentation excludes unvested shares of restricted Class A common stock, as restricted shares are treated as issued and outstanding for financial statement presentation purposes only after such shares have vested and, therefore, have ceased to be subject to a risk of forfeiture. As of October 31, 2020, November 2, 2019 and February 1, 2020 there were 4.6 million, 3.4 million and 3.4 million, respectively, of unvested shares of restricted stock. Accordingly, as of October 31, 2020, November 2, 2019 and February 1, 2020 there were 69.8 million, 71.3 million and 67.7 million, respectively, of shares of Class A common stock, including unvested restricted shares, legally issued and outstanding.
Restricted Cash
Restricted cash of $156.7 million, $14.1 million and $14.1 million as of October 31, 2020, November 2, 2019 and February 1, 2020, respectively, consists primarily of bank deposits that collateralize the Company's obligations to vendors and landlords.
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the condensed consolidated balance sheets to total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows (in millions):
October 31,
2020		November 2,
2019		February 1,
2020
Cash and cash equivalents$445.9 $290.3 $499.4 
Restricted cash140.7 0.3 0.3 
Long-term restricted cash16.0 13.8 13.8 
Total cash, cash equivalents and restricted cash in the statements of cash flows$602.6 $304.4 $513.5 
Assets Held-for-Sale
The Company's corporate aircraft was classified as assets held-for-sale as of November 2, 2019 and February 1, 2020, which had an estimated fair value, less costs to sell, of $12.8 million and $11.8 million, respectively. The Company recognized impairment charges of $3.2 million on the corporate aircraft during the 39 weeks ended October 31, 2020, which was partially attributable to recent economic impacts associated with the COVID-19 pandemic. On June 5, 2020, the Company sold its corporate aircraft with net cash proceeds from the sale totaling $8.6 million, net of costs to sell. NaN gain or loss on the sale of the aircraft was recognized.
Property and Equipment, Net
Accumulated depreciation related to the Company's property and equipment totaled $1,175.3 million, $1,230.4 million and $1,190.1 million as of October 31, 2020, November 2, 2019 and February 1, 2020, respectively.
The Company periodically reviews its 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. The Company assesses recoverability based on several factors, including its intention with respect to its 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. Impairment losses were recorded totaling $1.0 million during the 39 weeks ended October 31, 2020. Impairment losses were recorded totaling $3.6 million during the 13 and 39 weeks ended November 2, 2019.
Share RepurchasesAt-the-Market Equity Offering
During the third quarter of fiscal 2019,nine months ended October 30, 2021, we executed a series of open market repurchases forsold an aggregate of 22.6 million8,500,000 shares of our Class A common stock totaling $115.7under our at-the market equity offering program (the "ATM Transactions"). We generated $1.68 billion in aggregate gross proceeds from sales under the ATM Transactions and paid an aggregate of $10.1 million includingin commissions to the sales agent, among other legal and administrative fees. These commissions and fees are recognized in additional paid-in capital on our Consolidated Balance Sheets and commissions. Includedselling, general and administration expenses in these amounts are repurchasesour Consolidated Statements of 0.3 million shares for $1.7 million that were initiated prior to November 2, 2019, but not settled until the fourth quarter of fiscal 2019.Operations.
Discontinued Operations and Dispositions
On September 25, 2019, weThe historic results of our Spring Mobile business, sold our Simply Mac business to Cool Holdings, Inc. for total consideration of $12.9 million subject to customary post-closing adjustments. The consideration consisted of $5.2 million in cash and a note receivable of $7.7 million,
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
which was amended during the first quarter of fiscal 2020 to revise the amount to $1.3 million. We recognized a loss on sale during the third quarter of fiscal 2019 of $1.3 million, net of tax. Subsequently, during the fourth quarter of fiscal 2019, we fully reserved the $7.7 million note receivable due to the buyer's failure to make scheduled payments. We recognized a total loss on sale of $9.1 million, net of tax, during fiscal 2019.
During the fourth quarter of fiscal 2018, the Company sold its Spring Mobile business. The historic results of Spring Mobile are presented as discontinued operations, which primarilyand consist of residual wind-down costs for all periods presented. The net loss from discontinued operations for the 13 weeksnine months ended October 31, 2020 and November 2, 2019 consisted of $0.0$1.2 million and $0.2$0.3 million in selling, general and administrative expenses respectively. The net loss from discontinued operations for the 39 weeks ended October 31, 2020 and November 2, 2019 consisted of $1.2 million and $3.2 million in selling, general and administrative expenses, respectively and $0.3 million and $0.6 million in income tax benefit, respectively.respectively, in our Consolidated Statements of Operations.
Adoption
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Table of New Accounting PronouncementsContents
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.GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
(unaudited)
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 asand 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 evaluatingWe do not expect the adoption of this ASU to result in a material impact that ASU 2019-12 will have on itsour 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'sour 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 evaluatingWe do not expect the adoption of this ASU to result in a material impact that ASU 2020-04 will have on itsour consolidated financial statements.
2.    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, the Company continued to process orders by offering curbside pick-up, ship from store and e-commerce delivery options in many of its stores. These temporary store closures began in late March 2020 and by the end of fiscal June 2020, 98% of the Company's 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. GameStop's 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 the Company's other segments and New Zealand. During the third quarter of fiscal 2020, the substantial majority of the Company's stores were open, with approximately 15% of the Company's stores in Australia temporarily closed for approximately four weeks due to an outbreak of COVID-19.
Additionally, starting in late October 2020, as COVID-19 cases began to escalate in regions around the world, all of the Company's stores in France and Ireland were temporarily closed as required by federal governmental authorities, while certain of our stores in Canada, Australia and Austria closed temporarily starting in early to mid-November. Although certain stores remain closed, some of the Company's stores in France, Ireland, Canada and Australia are offering curbside pick-up. The Company remains vigilant in its compliance with COVID-19 regulations across its operating regions, and as such has reverted a minor number of store operations in the United States in early November to curbside pick-up only.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 the Company's results of operations during the 13 and 39 weeks ended October 31, 2020. In response, the Company has 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 the 39 weeks ended October 31, 2020, the Company incurred $23.3 million 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 its stores, shared service centers and distribution centers across all geographies where the Company operates.
The aggregation of these events caused the Company 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 the 39 weeks ended October 31, 2020 the Company recognized impairment charges of $1.6 million. In addition, during the 39 weeks ended October 31, 2020, the Company recognized impairment charges of $3.2 million for its corporate aircraft, which was partially attributable to the economic impacts associated with the COVID-19 pandemic. The corporate aircraft was sold during the second quarter of fiscal 2020 for $8.6 million, net of costs to sell. See Note 1, "General Information" for further details.
During the 39 weeks ended October 31, 2020 the Company continued to assess the likelihood of realizing the benefits of its deferred tax assets. The Company assesses the realizability of its 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 the Company's view of the longer-term operating outlook has not been significantly impacted by COVID-19, its ability to recover these deferred tax assets depends on several factors, including the Company's short and long-term results of operations. As a result of this analysis, the Company maintains valuation allowances of approximately $187.9 million on the majority of its U.S. and foreign net deferred tax assets as of October 31, 2020. See Note 10, “Income Taxes" for further information.
The Company evaluated its accounts receivable, 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.
The Company also evaluated its merchandise inventories, which are carried at the lower of cost or market generally using the average cost method. The Company is required to record valuation adjustments to inventory to reflect potential obsolescence or over-valuation as a result of cost exceeding market. In valuing inventory, the Company considers quantities on hand, recent sales, potential price protections, returns to vendors and other factors. Given the nature of the Company's products and the temporary store closures between March and June 2020, the COVID-19 pandemic did not significantly impact its estimates of inventory valuation.
Liquidity and Other Impacts
As of October 31, 2020, the Company had total unrestricted cash on hand of $445.9 million and an additional $175.4 million of available borrowing capacity under its revolving credit facilities. See Note 6, "Debt," for further information. As mentioned above, the Company has taken actions to align expenses and inventory levels given the impacts of the current operating environment and has projected it 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, the Company completed an exchange offer for a portion of its unsecured senior notes due in March 2021 resulting in the replacement of 52% of such notes (based on aggregate principal amount) for newly issued secured senior notes due in March 2023. See Note 6, "Debt," for further details on the exchange offer and related impacts to scheduled debt maturities. See Note 11, "Subsequent Events," for information regarding the Company's notice of redemption to redeem $125.0 million of its outstanding 2021 Senior Notes.
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 employees who are unable to work during the COVID-19 pandemic and options to defer the Company's share of Social Security payroll taxes. The Company qualified for the deferral of payroll and other tax payments and, as a result, it has deferred, and continues 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 the Company's unaudited condensed consolidated balance sheets. In addition, the Company's 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 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 6, "Debt" for further information.
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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the 13 and 39 weeks ended October 31, 2020, the Company received $9.7 million and $18.8 million, respectively, of COVID-19-related rent concessions comprised of rent abatements and rent deferrals. The Company applied lease modification guidance to any concession arrangement that extended the term of the lease and substantially altered future cash flows. The Company 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, the Company 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 the Company's 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 the Company continues to comply with all governmental health and safety requirements for its associates and customers while resuming and maintaining substantially full operations, the persistence and potential resurgence of the COVID-19 pandemic may require the Company 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 Company's suppliers, which may interrupt the Company's 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 the Company's business, financial condition, results of operations and cash flows.
3.    Revenue
At the end of fiscal 2019, the Company revised the categories of its similar products, as presented below, to better align with management's view of the business. Prior periods have been reclassified to conform to the current period presentation. NetThe following table presents net sales by significant product category for the periods indicated is as follows (in millions):
13 Weeks Ended39 Weeks Ended
 October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Hardware and accessories (1)
$413.4 $546.0 $1,368.1 $1,757.4 
Software (2)
444.4 730.6 1,247.9 2,022.0 
Collectibles146.9 161.9 351.7 492.5 
Total$1,004.7 $1,438.5 $2,967.7 $4,271.9 
category:
Three Months EndedNine Months Ended
 October 30,
2021		October 31,
2020		October 30,
2021		October 31,
2020
Hardware and accessories (1)
$669.9 $413.4 $1,983.0 $1,368.1 
Software (2)
434.5 444.4 1,229.0 1,247.9 
Collectibles192.2 146.9 544.8 351.7 
Total$1,296.6 $1,004.7 $3,756.8 $2,967.7 

(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, warranties, mobile and consumer electronics, and the operations of Simply Mac stores, which were sold in September 2019.electronics.
(2)    Includes sales of new and pre-owned video game software, digital software, and PC entertainment software.
See Note 9,Note 8, "Segment Information," for net sales by geographic location.
Performance Obligations
The Company hasWe have arrangements with customers where itsour performance obligations are satisfied over time, which primarily relate to extended warranties and itsour Game Informer® magazine. Revenues do not include sales tax or other taxes collected from customers. The Company expectsWe expect to recognize revenue in future periods for remaining performance obligations it haswe have associated with unredeemed gift cards, trade-in credits, reservation deposits and itsour PowerUp Rewards loyalty program (collectively, "unredeemed customer liabilities"), extended warranties and subscriptions to itsour Game Informer® magazine. These performance obligations are recognized in accrued liabilities and other current liabilities on our Consolidated Balance Sheets.
Performance obligations associated with unredeemed customer liabilities are primarily satisfied at the time customers redeem gift cards, trade-in credits, customer deposits or loyalty program points for products offered by the Company.that we offer. Unredeemed customer liabilities are generally redeemed within one year of issuance. As of October 30, 2021 and October 31, 2020, and November 2, 2019, the Company'sour unredeemed customer liabilities totaled $326.2$226.9 million and $250.5$326.2 million, respectively.
The Company offersWe 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 October 30, 2021 and October 31, 2020, and November 2, 2019, the Company'sour deferred revenue liability related to extended warranties totaled $66.7 million and $47.7 million, and $58.9 million, respectively.
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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Performance obligations associated with subscriptions to Game Informer® magazine are satisfied when monthlyperiodic magazines are delivered in print form or made available in digital format. The significant majority of customer subscriptions are for 12 monthly issues.annual. As of October 30, 2021 and October 31, 2020, and November 2, 2019, the Companywe had deferred revenue of $30.7$45.1 million and $39.2$30.7 million, respectively, associated with our Game Informer® magazine.
Significant Judgments and Estimates
The Company accruesWe accrue PowerUp Rewards loyalty points at the estimated retail price per point, net of estimated breakage, which can be redeemed by loyalty program members for products offered by the Company.we offer. The estimated retail price per point is based on the actual historical retail prices of product(s) purchased through the redemption of loyalty points. The Company estimatesWe estimate breakage of loyalty points and unredeemed gift cards based on historical redemption rates.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
(unaudited)
Contract Balances
The Company'sOur contract liabilities primarily consist of unredeemed customer liabilities and deferred revenues associated with gift cards, extended warranties and subscriptions to Game Informer® magazine. The opening balance, current period changes and ending balance of the Company's contract liabilities are as follows (in millions):
October 31, 2020November 2, 2019
Contract liability beginning balance$339.2 $376.9 
Increase to contract liabilities (1)
562.2 677.1 
Decrease to contract liabilities (2)
(496.5)(705.0)
Other adjustments (3)
(0.3)(0.4)
Contract liability ending balance$404.6 $348.6 
The following table presents a rollforward of our contract liabilities:
October 30,
2021		October 31,
2020
Contract liability beginning balance$348.2 $339.2 
Increase to contract liabilities (1)
680.1 562.2 
Decrease to contract liabilities (2)
(688.9)(496.5)
Other adjustments (3)
(0.7)(0.3)
Contract liability ending balance$338.7 $404.6 

(1)    Includes issuances of gift cards, trade-in credits and loyalty points, new reservation deposits, new subscriptions to Game Informer® and extended warranties sold.
(2)    Includes redemptions of gift cards, trade-in credits, loyalty points and customer deposits as well asand revenues recognized for Game Informer® and extended warranties. During the 39 weeksnine months ended October 30, 2021, there were $41.6 million of gift cards redeemed that were outstanding as of January 30, 2021. During the nine months ended October 31, 2020, there were $36.6 million of gift cards redeemed that were outstanding as of February 1, 2020. During the 39 weeks ended November 2, 2019, there were $47.3 million of gift cards redeemed that were outstanding as of February 2, 2019.
(3)    Primarily includes foreign currency translation adjustments.
4.    Fair Value Measurements and Financial Instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Applicable accounting standards require disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included withinin Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting the Company'sour assumptions about pricing by market participants.
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
Assets and liabilities that are measured at fair value on a recurring basis include the Company'sour foreign currency contracts, Company-owned life insurance policies with a cash surrender value, and certain nonqualified deferred compensation liabilities.
The Company values itsWe value our foreign currency contracts, life insurance policies with cash surrender values and certain nonqualified deferred compensation liabilities based on Level 2 inputs using quotations provided by major market news 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 asand other relevant economic measures, all of which are observable in active markets. When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.
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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company'sfollowing table presents our assets and liabilities measured at fair value on a recurring basis, as of October 31, 2020, November 2, 2019 and February 1, 2020,which utilize Level 2 inputs and include the following (in millions):
October 31, 2020November 2, 2019February 1, 2020
Assets
Foreign currency contracts(1)
$1.3 $1.2 $1.4 
Company-owned life insurance(2)
3.2 16.2 4.1 
Total assets$4.5 $17.4 $5.5 
Liabilities
Foreign currency contracts(3)
$3.2 $0.5 $0.3 
Nonqualified deferred compensation(3)
1.0 0.8 1.0 
Total liabilities$4.2 $1.3 $1.3 
inputs:
October 30,
2021		October 31,
2020		January 30, 2021
Assets
Foreign currency contracts(1)
$4.1 $1.3 $2.5 
Company-owned life insurance(2)
3.0 3.2 2.7 
Total assets$7.1 $4.5 $5.2 
Liabilities
Foreign currency contracts(3)
$0.1 $3.2 $2.4 
Nonqualified deferred compensation(3)
0.6 1.0 0.6 
Total liabilities$0.7 $4.2 $3.0 

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GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
(unaudited)
(1)     Recognized in prepaid expenses and other current assets in the Company's unaudited condensed consolidated balance sheets.on our Consolidated Balance Sheets.
(2)    Recognized in other non-currentnoncurrent assets in the Company's unaudited condensed consolidated balance sheets.on our Consolidated Balance Sheets.
(3)    Recognized in accrued liabilities and other current liabilities in the Company's unaudited condensed consolidated balance sheets.on our Consolidated Balance Sheets.
The Company usesWe use forward exchange contracts to manage currency risk primarily related to intercompany loans and third party accounts payable denominated in non-functional currencies. These foreign currency 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 balances denominated in foreign currencies. The total gross notional value of derivatives related to the Company'sour foreign currency contracts was $178.7 million, $262.3 million $147.1 million and $144.6$206.9 million as of October 30, 2021, October 31, 2020 November 2, 2019 and February 1, 2020,January 30, 2021, respectively.
ActivityThe following table presents activity related to the trading of derivative instruments and the offsetting impact of related balances denominated in foreign currencies recognized in selling, general and administrative expense is as follows (in millions):in our Consolidated Statements of Operations:
 Three Months EndedNine Months Ended
 October 30,
2021		October 31,
2020		October 30,
2021		October 31,
2020
Gains (Losses) on changes in fair value of derivative instruments$5.6 $0.6 $7.2 $(4.6)
(Losses) gains on re-measurement of intercompany loans and third-party accounts payable denominated in foreign currencies(4.3)(0.5)(4.9)4.7 
Net gains (losses)$1.3 $0.1 $2.3 $0.1 
 13 Weeks Ended39 Weeks Ended
 October 31,
2020		November 2,
2019		October 31,
2020		November 2,
2019
Gains (losses) on the changes in fair value of derivative instruments$0.6 $0.4 $(4.6)$3.2 
(Losses) gains on the re-measurement of related intercompany loans and third-party accounts payable denominated in foreign currencies(0.5)0.1 4.7 (2.7)
Net gains$0.1 $0.5 $0.1 $0.5 
The Company does not use derivative financial instruments for trading or speculative purposes. The Company isWe are exposed to counterparty credit risk on all of itsour derivative financial instruments and cash equivalent investments. The Company managesWe manage counterparty risk according to the guidelines and controls established under our comprehensive risk management and investment policies. The CompanyWe continuously monitors itsmonitor our counterparty credit risk and utilizesutilize a number of different counterparties to minimize itsour exposure to potential defaults. The Company does not require collateral under derivative or investment agreements.
Assets that are Measured at Fair Value on a Non-recurringNonrecurring Basis
Assets that are measured at fair value on a non-recurringnonrecurring basis relate primarily to property and equipment, operating lease right-of-use ("ROU") assets and other intangible assets, which are remeasured when the estimated fair value is below its carrying value. For these assets, the Company does not periodically adjust carrying value to fair value; rather, when it determinesWhen we determine that impairment has occurred, the carrying value of the asset is reduced to its fair value.
During the 39 weeksnine months ended October 30, 2021 and October 31, 2020, and November 2, 2019, the Companywe recognized impairment charges totaling $1.6$0.6 million and $3.6$1.6 million, respectively, associated with store-level ROU and property and equipment assets to reflect their fair values of 0.values. During the 39 weeksnine months ended October 31, 2020, and November 2, 2019, the Companywe also recognized impairment charges of $3.2 million and $7.7 million, respectively, related to itsour corporate aircraft to reflect its fair value of $8.6 million and $12.8 million asbefore the sale of October 31, 2020 and November 2, 2019, respectively. The corporate aircraft was classified as assets held-for-sale in our unaudited condensed consolidated balance sheets as of November 2, 2019 and February 1, 2020. The company sold its corporatethe aircraft on June 5, 2020.
Other Fair Value Disclosures
The carrying values of the Company'sour cash equivalents, net receivables, net, accounts payable and short-term borrowings approximate their fair values due to their short-term maturities.
As of October 30, 2021, our government-subsidized low interest French term loans due October 2022 through October 2026 ("French Term Loans") had a carrying value of $46.2 million and a fair value of $38.5 million. The fair values of our French Term Loans were estimated based on a model that discounted future principal and interest payments at interest rates available to us at the end of the period for similar debt of the same maturity, which is a Level 2 input as defined by the fair value hierarchy.







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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of October 31, 2020 the Company's unsecured 6.75% senior notes due in 2021 had a net carrying value of $197.9 million and a fair value of $197.9 million, and its secured 10.00% senior notes due in 2023 had a net carrying value of $216.0 million and a fair value of $216.4 million. The fair values of the Company's senior notes were determined based on observable inputs (Level 2), including quoted market prices obtained through an external pricing source which derives its price valuations from daily marketplace transactions, adjusted to reflect the spreads of benchmark bonds, credit risk and certain other variables.
5.    Leases
The Company conducts the substantial majority of its business with leased real estate properties, including retail stores, warehouse facilities and office space. The Company also leases 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 the Company 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 the Company's lease agreements are classified as operating leases.
Effective February 3, 2019, the Company adopted ASC 842, Leases. Under ASC 842, fixed payments associated with its operating leases are included in operating lease right-of-use ("ROU") assets and both current and noncurrent operating lease liabilities on the balance sheet. The Company determines if an arrangement is considered a lease at inception. ROU assets are recognized 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, the Company utilizes its 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 the Company's credit rating, country risk, corporate bond yields, the effect of collateralization, as well as comparison to its borrowing rates. For real estate leases, the Company does not separate the components of a contract, thus its future payments include minimum rent payments and fixed executory costs. For non-real estate leases, future payments include only fixed minimum rent payments. The Company records the amortization of ROU assets and the accretion of lease liabilities as a single lease cost on a straight-line basis over the lease term, which includes option terms the Company is reasonably certain to exercise. The Company recognizes cash or lease incentives as a reduction to the ROU asset. ROU assets are assessed for impairment in accordance with the Company's 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.

In July of 2020, the Company sold, in separate unrelated transactions, to unaffiliated third parties: i) its 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. The net proceeds from the sale of these assets will be used for general corporate purposes. As a result of these transactions, a gain on sale of assets of $11.3 million was recognized, which is included in the Company's unaudited condensed consolidated statement of operations in gain on sale of assets for the 39 weeks ended October 31, 2020.
In connection with each of the sales, the Company leased-back from the applicable purchasers its corporate headquarters for an initial term of ten years, and the ancillary office space and refurbishment center for two years. The leaseback agreement for the corporate headquarters contains 3 renewal periods of five years each; the Company recognized only the initial term of the lease as part of its right-of-use asset and lease liability for the corporate headquarters. The other facilities do not contain a renewal option. The annual rent for the corporate headquarters will start at $1.7 million, plus taxes, utilities, management fees and other operating and maintenance expenses and will increase by 2.25% per year. The annual rent for the other facilities will be $1.3 million with no rent escalation, plus taxes, utilities, management fees and other operating and maintenance expenses. These leaseback agreements are accounted for as operating leases.
With respect to the leaseback of the corporate headquarters, the Company agreed to provide a letter of credit to the buyer-lessor within 18 months from the closing date to secure the Company's lease obligation. Given that the purchase price of the corporate headquarters was reduced by $2.8 million to account for the deferred issuance of this letter of credit, as of October 31, 2020 the Company recognized a contract asset for the same amount within “prepaid expenses and other current assets” representing the variable consideration on the purchase price. Upon delivering the letter of credit, the Company will be entitled to a rent credit of an equivalent amount. This variable consideration is included in the total gain on sale of assets recognized during the second quarter of 2020.
In August 2020, the Company sold its 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, the Company sold its 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 Company recognized only the initial term of the lease as part of its right-of-use asset and lease liability for both the Australian and Canadian headquarters. The net proceeds from the sale of these assets will be used for general corporate
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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
purposes. As a result of these transactions, a gain on sale of assets of $21.1 million was recognized, which is included in(unaudited)
5.    Debt
The following table presents the Company's unaudited condensed consolidated statement of operations in gain on sale of assets for the 13 and 39 weeks ended October 31, 2020.
Rent expense under operating leases was as follows (in millions):
13 Weeks Ended39 Weeks Ended
October 31,
2020		November 2,
2019		October 31,
2020		November 2,
2019
Operating lease cost$73.4 $86.6 $233.7 $257.8 
Variable lease cost (1)
20.2 23.1 60.3 72.2 
Total rent expense$93.6 $109.7 $294.0 $330.0 

(1)    Variable lease cost primarily includes percentage rentals and variable executory costs.
During the 39 weeks ended October 31, 2020 and November 2, 2019, the Company had cash outflows of $193.7 million and $223.0 million, respectively, associated with operating leases. Refer to Note 2, "COVID-19 Impacts" as it pertains to impacts of rent obligations due to COVID-19. The Company recognized $82.2 million and $147.3 million during the 39 weeks ended October 31, 2020 and November 2, 2019, respectively, of ROU assets that were obtained in exchange for operating lease obligations. During the 39 weeks ended October 31, 2020, $0.6 million of store-level ROU asset impairment charges were recognized. The Company did not record any impairment charges related to ROU assets during the 13 weeks ended October 31, 2020 or the 13 and 39 weeks ended November 2, 2019.
The weighted-average remaining lease term, which includes reasonably certain renewal options, and the weighted-average discount rate for operating leases included in the measurement of the Company's lease liabilities, as of October 31, 2020, November 2, 2019, and February 1, 2020, were as follows:
October 31, 2020November 2, 2019February 1, 2020
Weighted-average remaining lease term (years)(1)
4.54.54.7
Weighted-average discount rate5.1 %4.4 %4.1 %

(1)    The weighted-average remaining lease term is weighted based on the lease liability balance for each lease as of October 31, 2020, November 2, 2019 and February 1, 2020. This weighted average calculation differs from the Company's simple average remaining lease term due to the inclusion of reasonably certain renewal options and the effect of the lease liabilitycarrying value of longer term leases.our debt:
October 30,
2021		October 31,
2020		January 30, 2021
Revolving credit facility due 2022$— $25.0 $25.0 
French Term Loans46.2 46.6 48.6 
6.75% Senior Notes due 2021— 198.2 73.2 
10.00% Senior Notes due 2023— 216.4 216.4 
Less: Senior Notes unamortized debt financing costs— (0.7)(0.5)
Total debt, net$46.2 $485.5 $362.7 
Less: short-term debt and current portion of long-term debt(1)
1.4 269.5 146.7 
Long-term debt, net$44.8 $216.0 $216.0 
______________________________________________________________
Expected lease payments associated with(1)    Represents the Company's operating lease liabilities, excluding percentage rentals, as of October 31, 2020, are as follows (in millions):
Period
Operating Leases (1)
Remainder of Fiscal Year 2020, as of October 31, 2020$71.8 
Fiscal Year 2021217.2 
Fiscal Year 2022150.4 
Fiscal Year 2023103.3 
Fiscal Year 202473.2 
Thereafter126.6 
Total remaining lease payments742.5 
Less: Interest(72.9)
Present value of lease liabilities (2)
$669.6 

(1)    Operating lease payments exclude legally binding lease payments for leases signed but not yet commenced.
(2)    The present value of lease liabilities consist of $212.9 million classified as current portion of operating lease liabilities and $456.7 million classified as long-term operating lease liabilities.

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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6.    Debt
The carrying value of the Company's debt is comprised as follows (in millions):
October 31, 2020November 2, 2019February 1, 2020
Revolving credit facility expiring November 2022$25.0 $0 $0 
French term loans due June 2021(1)
23.3 0 0 
French term loans due October 2021(1)
23.3 0 0 
2021 Senior Notes principal amount198.2 421.4 421.4 
2023 Senior Notes principal amount216.4 0 0 
Less: Senior Notes unamortized debt financing costs(0.7)(2.0)(1.6)
Total debt, net(2)
$485.5 $419.4 $419.8 
Less: short-term debt and current portion of long-term debt(3)
(269.5)0 0 
Long-term debt, net$216.0 $419.4 $419.8 

(1)    These term loans may be extended, subject to specified conditions, for up to five additional years at Micromania SAS's request.
(2)    During the second quarter of fiscal 2020, the Company's wholly-owned subsidiary, Micromania SAS, obtained an unsecured credit facility. NaN amounts have been drawn under this facility through October 31, 2020, and this facility expires in January 2021.
(3)    Includes advances under the revolving credit facility expiring November 2022, the French term loans due June 2021 and October 2021,Term Loans and the 6.75% Senior Notes due 2021 ("2021 Senior Notes,Notes"), net of the associated unamortized debt financing costs. See Note 11, "Subsequent Events" for details regarding the scheduled redemption of a portionPrior periods include loan advances under our asset-based revolving credit facility due November 2022 ("Revolver").
2021 Debt Payments
On March 15, 2021, we repaid at maturity $73.2 million outstanding principal amount of our 2021 Senior Notes.
Senior Notes
2023 Senior Notes. In July 2020,On April 30, 2021, we completed the Company issued approximatelyvoluntary early redemption of $216.4 million aggregateoutstanding principal amount of our 10.00% senior notesSenior Notes due March 15, 2023 (the "2023 Senior Notes") in exchange for an equal aggregate principal amount of its 6.75% senior notes due March 15, 2021 (the "2021("2023 Senior Notes"). Interest is payable onThis voluntary early redemption covered the entire amount of then outstanding 2023 Senior Notes, semi-annually in arrears on March 15 and September 15which represented all of each year.
The Company incurred approximately $7.4 million in fees and expenses in connection with the exchange, consisting primarily of bank and legal fees, which are included in selling, general and administrative expenses in the Company's condensed consolidated statements of operations for the 39 weeks ended October 31, 2020.
The Company's obligations under the 2023 Senior Notes are fully and unconditionally guaranteed on a senior secured basis by most of its domestic subsidiaries. The 2023 Senior Notes and the related guarantees are secured by first-priority liens on most of the Company's and the guarantors’ assets, other than Excluded Property and ABL Priority Collateral (each as defined in the indenture governing the 2023 Senior Notes), and by second-priority liens on the ABL Priority Collateral (which generally includes most of the Company's and the guarantors’ credit card receivables, accounts receivable, payment intangibles, inventory, pledged deposit accounts and related assets), in each case, subject to certain exceptions and permitted liens.
The indenture governing the 2023 Senior Notes contains restrictions on the ability of the Company and its restricted subsidiaries to incur, assume or permit to exist additional indebtedness or guaranty obligations; declare or pay dividends or redeem or repurchase capital stock; prepay, redeem or purchase certain subordinated indebtedness; issue certain preferred stock or similar equity securities; make loans and certain investments; sell assets; incur liens; engage in transactions with affiliates; enter into agreements restricting the ability of subsidiaries to pay dividends; and engage in mergers, acquisitions and other business combinations. The 2023 Senior Notes indenture also contains certain affirmative covenants and events of default.
The 2023 Senior Notes have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state and may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act and applicable state securities laws.
2021 Senior Notes. In March 2016, the Company issued $475.0 million of 2021 Senior Notes. Interest is payable on the 2021 Senior Notes semi-annually in arrears on March 15 and September 15 of each year. The Company incurred approximately $8.1 million in fees and expenses in connection with the issuance of the 2021 Senior Notes, which were capitalized during the first quarter of fiscal 2016 and are being amortized as interest expense over the term of the 2021 Senior Notes.our long-term debt. In connection with the exchange transaction discussed above, approximately $0.5 millionvoluntary early redemption of these fees and expenses are now being amortized as interest expense over the term of theour 2023 Notes. The 2021 Senior Notes, have not been registered under the Securities Act or the securities laws of any state. The 2021 Senior Notes were offeredwe paid approximately $219.1 million in the United States to "qualified institutional buyers" pursuant to the exemption from registration under Rule 144A of the Securities Actaggregate consideration, including accrued and in exempted offshore transactions pursuant to Regulation S under the Securities Act.
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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the 39 weeks ended November 2, 2019, the Company repurchased $53.6 million of its 2021 Senior Notes in open market transactions at prices ranging from 99.6% to 101.5% of face value.
During the 39 weeks ended October 31, 2020, the Company repurchased $6.8 million of 2021 Senior Notes in open market transactions at prices ranging from 71.5% to 79.1% of face value, of which $0.5 million were extinguished as of May 2, 2020, with the remaining $6.3 million extinguished as of May 21, 2020.unpaid interest. In connection with the exchange transaction described above, $216.4 million aggregate principal amountvoluntary early redemption of the 2021 Senior Notes were exchanged for an equal aggregate principal amount ofour 2023 Senior Notes, and allwe paid a $17.8 million make-whole premium which is recognized in interest that had accrued on the 2021 Senior Notes that were exchanged was paid through July 6, 2020. Upon consummationexpense in our Consolidated Statements of the exchange transaction and asOperations. Additionally, we accelerated amortization of October 31, 2020, $198.2$0.4 million aggregate principal amount of 2021 Senior Notes remained outstanding.
In connectiondeferred financing costs associated with the exchange transaction, the Company entered into the Fifth Supplemental Indenture governing the 2021 Senior Notes. The Fifth Supplemental Indenture, which became effective on July 6, 2020, deleted certain restrictions in the original indenture relating to asset sales, liens, investments, stock repurchases, debt incurrence, debt repurchases and dividends.
Furthermore, the Fifth Supplemental Indenture eliminated certain events of default related to failures to pay, or acceleration of, debt (other than the 2021 Senior Notes), breaches of certain covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization.
On November 10, 2020, the Company issued a notice to redeem, on December 11, 2020, $125.0 million in aggregate principal amount of 2021 Senior Notes. See Note 11, "Subsequent Events," for further details.
Revolving Credit Facility
The Company maintains 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 the Company and its domestic subsidiaries, such lien being junior to the lien in certain of such assets that secure theour 2023 Senior Notes.
Borrowing availability under the Revolver is limited to a borrowing base which allows the Company to borrow up to 90% of the appraised value of its inventory (or 92.5% during the period of July 15 and October 15 of each year), plus 90% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount available to borrow under the Revolver by an amount equal to the face value of the letters of credit. The Company's ability to pay cash dividends, redeem options and repurchase shares is generally permitted, except under certain circumstances, including if either (1) excess availability under the Revolver is less than 20%, or is projected to be within six months after such payment or (2) excess availability under the Revolver is less than 15%, or is projected to be within six months after such payment, and the fixed charge coverage ratio, as calculated on a pro-forma basis for the prior 12 months, is 1.0:1.0 or less. In the event that excess availability under the Revolver is at any time less than the greater of (1) $12.5 million or (2) 10% of the lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio covenant of 1.0:1.0 (the "Availability Reduction").
The Revolver places certain restrictions on the Company and its subsidiaries, including limitations on asset sales, liens, investments, loans, guarantees, acquisitions and debt incurrence.
The per annum interest rate under the Revolver is variable and is calculated by applying a margin (1) for prime rate loans of 0.25% to 0.50% above the highest of (a) the prime rate of the administrative agent, (b) the federal funds effective rate plus 0.50% and (c) the LIBO rate for a one month interest period as determined on such day plus 1.00%, and (2) for LIBO rate loans of 1.25% to 1.50% above the LIBO rate. The applicable margin is determined quarterly as a function of the Company's average daily excess availability under the facility. In addition, the Company is required to pay a commitment fee of 0.25% for any unused portion of the total commitment under the Revolver. As of October 31, 2020, the applicable margin was 0.25% for prime rate loans and 1.25% for LIBO rate loans.
The Revolver provides for customary events of default, including for failure to pay principal or interest when due, failure to comply with covenants, failure of any material representation or warranty proving to be true and correct in a material respect, certain bankruptcy, insolvency or receivership events affecting the Company or its subsidiaries, defaults relating to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of the Company or certain of its subsidiaries. During the 39 weeks ended October 31, 2020, the Company borrowed $150.0 million and repaid $125.0 million under the Revolver. As of October 31, 2020, total availability under the Revolver after giving effect to the Availability Reduction was $152.1 million, with outstanding borrowings of $25.0 million and outstanding standby letters of credit of $59.8 million. The Company is currently in compliance with all covenants in the Revolver.
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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In August 2020, the Company entered into the fourth amendment (“Fourth Amendment”) to the credit agreement governing the Revolver (“Credit Agreement”). The foregoing discussion of the Revolver gives effect to the Fourth Amendment, and the amendments therein include, but are not limited to the following:
•a reduction in the amount of the excess availability threshold 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;
•an increase in the sublimit for the issuances of letters of credit under the Credit Agreement from $50 million to $100 million; and
•an increase in 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 for the benefit of 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, may not exceed $275 million in the aggregate.
Letter of Credit Facilities
Separately from the Revolver, the Company maintains 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 October 31, 2020, the Company had $90.2 million of outstanding letters of credit and bank guarantees under facilities outside of the Revolver.
French Term Loans and Credit Facility
During the second and third quarters of fiscal 2020, the Company'sour French subsidiary, Micromania SAS, entered into 6 separate unsecured term loans for a total of €40.0 million, ($46.6or $46.2 million, as of October 31, 2020). The30, 2021. In the second quarter of 2021, at the request of Micromania SAS, these term loans all bearwere extended for five years, with an amortization plan for the principal starting in October 2022. In connection with the extension, the interest at 0%. NaNrate increased from 0.0% to 0.7% for 3 of the term loans totaling €20.0 million, mature in June 2021 and 1% for the otherremaining 3 term loans totaling €20.0 million mature in October 2021, and all of them may be extended, subject to specified conditions, for up to five additional years at Micromania SAS's request. In connection with any extension, the interest rate would increase to a rate to be determined at the time of the extension.million. The French government has guaranteed 90% of the term loans pursuant to a state guaranteed loan program instituted in connection with the COVID-19 pandemic.
In addition, Micromania SAS obtained a €20.0 million ($23.3 million as of October 31, 2020) credit facility that provides for term loans of 10 to 93 days in duration to support its working capital needs. This facility was scheduled to expire in June 2021, but in consideration for the issuance of additional term loans to Micromania SAS in the third quarter of fiscal 2020, Micromania SAS agreed to accelerate the maturity of this facility to January 2021. Loans made under this facility accrue interest at a variable rate tied to the Euro Interbank Offered Rate plus an applicable margin of 1.5% and are secured by a pledge of the bank account from which repayments of the loans would be made. NaN amounts have been drawn under this facility through October 31, 2020.
Each of Micromania SAS's term loans, and short term credit facility, as described above, restrict the ability of Micromania SAS to make distributions and loans to its affiliates, including to the Company, and include various events that would result in the automatic acceleration of the loans thereunder, including failure to pay any principal or interest when due, acceleration of other indebtedness, a change of control and certain bankruptcy, insolvency or receivership events.
Revolving Credit Facility
7.Through November 3, 2021, we maintained the Revolver with a borrowing base capacity up to $420 million and a maturity date of November 2022. The Revolver also included a $200 million expansion feature, a $100 million letter of credit sublimit, and allowed for an incremental $50 million first-in, last-out facility. The applicable margins for prime rate loans ranged from 0.25% to 0.50% and, for the London Interbank Offered Rate ("LIBOR") loans, ranged from 1.25% to 1.50%. The Revolver was secured by substantially all of the assets of the Company and its domestic subsidiaries. As of October 30, 2021, the applicable margin was 0.25% for prime rate loans and 1.25% for LIBOR loans.
The agreement governing our Revolver placed certain restrictions on us and our subsidiaries, including, among others, limitations on asset sales, additional liens, investments, incurrence of additional debt and share repurchases. Additionally, the agreement contained customary events of default, including, among others, payment defaults, breaches of covenants and certain events of bankruptcy, insolvency and reorganization. The Revolver was subject to a fixed charge coverage ratio covenant if availability under the Revolver was below a certain amount (the "Availability Reduction").
As of October 30, 2021, we had no borrowings outstanding under the Revolver. During the first quarter of 2021, we repaid $25.0 million in borrowings under the Revolver. As of October 30, 2021, total availability under the Revolver after giving effect to the
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GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
(unaudited)
Availability Reduction was $202.4 million, with no outstanding borrowings and outstanding standby letters of credit of $57.9 million. As of October 30, 2021, we were in compliance with all covenants in the Revolver.
New Revolving Credit Facility

On November 3, 2021, we entered into an asset-based secured revolving credit facility (the "New Revolver"). The New Revolver provides for a borrowing capacity of $500 million with a maturity date of November 3, 2026. The New Revolver includes a $50 million swing loan revolving sub-facility, a $50 million Canadian revolving sub-facility, and a $250 million letter of credit sublimit. Borrowings under the New Revolver accrue interest at an adjusted LIBOR rate plus an applicable margin (ranging from 1.25% to 1.50%) or an adjusted prime rate plus an applicable margin (ranging from 0.25% to 0.50%). The Revolver was terminated in connection with our entry into the New Revolver.

6.    Commitments and Contingencies
CommitmentsLetter of Credit Facilities
Separate from the 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 October 30, 2021, we had $17.1 million of outstanding letters of credit and bank guarantees under facilities outside of the Revolver.
During the 39 weeksnine months ended October 31, 2020,30, 2021, there were no material changes to the Company'sour commitments as disclosed in its 2019our 2020 Annual Report on Form 10-K except as discussed in Note 6,5, "Debt."
Contingencies
Legal Proceedings
In the ordinary course of business, the Company is,we are, from time to time, subject to various legal proceedings, including matters involving wage and hour employee class actions, stockholder actions and consumer class actions. The CompanyWe may enter into discussions regarding settlement of these and other types of lawsuits, and may enter into settlement agreements, if it believeswe believe settlement is in the best interest of itsour stockholders. The Company doesWe do not believe that any such existing legal proceedings or settlements, individually or in the aggregate, will have a material effect on itsour financial condition, results of operations or liquidity.
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GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.7.    Earnings Per Share
Basic net income (loss) per common share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding and potentially dilutive securities outstanding during the period. Potentially dilutive securities include stock options, unvested restricted stock and unvested restricted stock units outstanding during the period, using the treasury stock method. Potentially dilutive securities are excluded from the computations of diluted earnings per share if their effect would be antidilutive.anti-dilutive. A net loss from continuing operations causes all potentially dilutive securities to be antidilutive. The Company hasanti-dilutive. We have certain undistributed stock awards that participate in dividends on a nonforfeitablenon-forfeitable basis, however, their impact on earnings per share under the two-class method is negligible. See Note 1, "General Information," for information regarding our unvested restricted stock and shares issued and outstanding.
A
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GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
(unaudited)
The following table presents a reconciliation of shares used in calculating basic and diluted net loss per common share is as follows (in millions):share:
13 Weeks Ended39 Weeks Ended Three Months EndedNine Months Ended
October 31,
2020		November 2,
2019		October 31,
2020		November 2,
2019		 October 30,
2021		October 31,
2020		October 30,
2021		October 31,
2020
Weighted-average common shares outstandingWeighted-average common shares outstanding65.2 82.1 64.9 94.8 Weighted-average common shares outstanding75.9 65.2 71.5 64.9 
Dilutive effect of stock options and restricted stock awards0 0 0 0 
Dilutive effect of stock options, restricted stock and restricted stock unitsDilutive effect of stock options, restricted stock and restricted stock units— — — — 
Weighted-average diluted common shares outstandingWeighted-average diluted common shares outstanding65.2 82.1 64.9 94.8 Weighted-average diluted common shares outstanding75.9 65.2 71.5 64.9 
Anti-dilutive stock options and restricted stock awards4.7 2.3 4.7 2.3 
Anti-dilutive shares:Anti-dilutive shares:
Restricted stock unitsRestricted stock units0.7 — 0.7 — 
Restricted stock Restricted stock0.4 4.6 0.4 4.6 
Stock options Stock options— 0.1 — 0.1 

As of October 30, 2021, October 31, 2020 and January 30, 2021 there were 1.1 million, 4.6 million and 4.6 million, respectively, of unvested restricted stock and restricted stock units. As of October 30, 2021, October 31, 2020 and January 30, 2021 there were 77.0 million, 69.8 million and 69.9 million, respectively, shares of Class A common stock, including unvested restricted shares, legally issued and outstanding.
As of October 30, 2021, 5.2 million shares of our Class A common stock were directly registered with our transfer agent, ComputerShare.
9.8.    Segment Information
The Company operates itsWe operate our business in 4 geographic segments: United States, Canada, Australia and Europe.
The Company identifiesWe identified segments based on a combination of geographic areas and management responsibility. Segment results for the United States include retail operations in 50 states and Guam; itsour e-commerce operations; and Game Informer® magazine; and Simply Mac, which was sold in September 2019.magazine. The United States segment also includes general and administrative expenses related to our corporate offices in the Company's corporate headquarters in Grapevine, Texas.United States. Segment results for Canada include retail and e-commerce operations in Canada and segment results for Australia include retail and e-commerce operations in Australia and New Zealand. Segment results for Europe include retail and e-commerce operations in six European6 countries for both the three and nine months ended October 30, 2021. Segment results for Europe included retail and e-commerce operations in 6 and 10 countries for the 13 weeksthree and nine months ended October 31,30, 2020, and 10 European countries for the 39 weeks ended October 31, 2020 as well as the 13 and 39 weeks ended November 2, 2019. The Company measuresrespectively. We measure segment profit using operating earnings, which is defined as income from continuing operations before intercompany royalty fees, net interest expense and income taxes. Transactions between reportable segments consist primarily of royalties, management fees, intersegment loans and related interest. There were 0no material intersegment sales during the 13three and 39 weeksnine months ended October 31, 202030, 2021 and November 2, 2019.
Segment information for the 13 and 39 weeks ended October 31, 2020 and November 2, 2019 is as follows (in millions):
United
States		CanadaAustraliaEuropeConsolidated
13 weeks ended October 31, 2020
Net sales$664.5 $55.9 $111.2 $173.1 $1,004.7 
Operating (loss) earnings(66.8)7.1 10.1 (13.4)(63.0)
13 weeks ended November 2, 2019
Net sales$987.5 $79.8 $117.0 $254.2 $1,438.5 
Operating loss(24.2)(3.9)(0.2)(17.3)(45.6)

2020.
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United
States		CanadaAustraliaEuropeConsolidated
three months ended October 30, 2021
Net sales$875.5 $68.3 $127.1 $225.7 $1,296.6 
Operating (loss) earnings(98.5)(1.5)0.7 (3.6)(102.9)
three months ended October 31, 2020
Net sales$664.5 $55.9 $111.2 $173.1 $1,004.7 
Operating (loss) earnings(66.8)7.1 10.1 (13.4)(63.0)
GAMESTOP CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
United
States		CanadaAustraliaEuropeConsolidated
39 weeks ended October 31, 2020
Net sales$2,009.3 $137.5 $373.9 $447.0 $2,967.7 
Operating (loss) earnings(189.6)(3.0)21.2 (85.2)(256.6)
39 weeks ended November 2, 2019
Net sales$3,010.7 $215.4 $339.8 $706.0 $4,271.9 
Operating loss(386.1)(16.3)(10.6)(61.8)(474.8)

nine months ended October 30, 2021United
States		CanadaAustraliaEuropeConsolidated
Net sales$2,636.9 $193.0 $373.1 $553.8 $3,756.8 
Operating (loss) earnings(152.3)(5.2)3.9 (48.1)(201.7)
nine months ended October 31, 2020
Net sales$2,009.3 $137.5 $373.9 $447.0 $2,967.7 
Operating (loss) earnings(189.6)(3.0)21.2 (85.2)(256.6)
10.9.    Income Taxes
In response to the COVID-19 pandemic, many governments have enacted measures to provide aid and economic stimulus. These measures include deferring the due dates of tax payments and other changes to their income and non-income-based tax laws as well as providing direct government assistance through grants and forgivable loans. The Coronavirus Aid, Relief, and Economic SecuritySecurities Act (the "CARES Act"), which was enacted on March 27, 2020 in the U.S., includesUnited States, included measures to assist companies, including temporary changes to income and non-income-based tax laws. With respect to the CARES Act, the Company currently expects to benefitwe have benefited from the deferral of certain payroll taxes, through the end of calendar year 2020, theallowed carryback of a 2020 net
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GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share amounts)
(unaudited)
operating loss, for fiscal 2020, the modification of limitation on business interest and certainthe technical correctionscorrection with respect to qualified improvement property. U.S. federal income tax receivable increased to $157.8 million as of October 30, 2021 compared to $47.8 million as of October 31, 2020 due to the net operating loss carryback allowed under the CARES Act. U.S. federal income tax receivable is recognized in prepaid expenses and other current assets on our Consolidated Balance Sheets.
The CompanyOur interim tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events and/or adjustments that may occur during the third quarter and the nine months ended October 30, 2021.
We recognized an income tax expense of $1.7 million, or (1.6)%, for the three months ended October 30, 2021 compared to an income tax benefit of $53.9 million, or 74.1%, for the 13 weeksthree months ended October 31, 2020. Our effective income tax rate of (1.6)% is primarily due to not recognizing tax benefits on current period losses and forecasted income taxes due in specific foreign and state jurisdictions in which we operate. Our effective tax rate of 74.1% for the three months ended October 31, 2020 was primarily due to tax benefits related to the CARES Act that were recorded during that period.
We recognized an income tax expense of $6.1 million, or (2.7)%, for the nine months ended October 30, 2021 compared to an income tax expense of $31.6$14.4 million, or (5.1)%, for the 13 weeksnine months ended November 2, 2019. The Company'sOctober 31, 2020. Our effective income tax rate increasedof (2.7)% is primarily due to 74.1%unrecognized tax benefits on current period losses and forecasted income taxes due in specific foreign and state jurisdictions in which we operate. Our effective tax rate of (5.1)% for the 13 weeksnine months ended October 31, 2020 comparedwas primarily due to (61.2)% fortax benefits related to the 13 weeks ended November 2, 2019. TheCARES Act as well as a significant increase in the effective income tax rate compared to the prior year quarter was primarily driven by a change in the tax status of certain foreign entities, sale and leaseback transactions, 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, and the relative mix of earnings across the jurisdictions within which we operate.
The Company recognized income tax expense of $14.4 million for the 39 weeks ended October 31, 2020 compared to an income tax benefit of $6.2 million for the 39 weeks ended November 2, 2019. The Company's effective income tax rate decreased to (5.1)% for the 39 weeks ended October 31, 2020 compared to 1.3% for the 39 weeks ended November 2, 2019. The decrease in the effective income tax rate compared to the prior year quarter was 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,sale and leaseback transactions, 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, and the relative mix of earnings across the jurisdictions within which we operate.
The Company assesses 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. Where the Company has determined existing deferred tax assets are not more likely than not to be realized, it has established a valuation allowance against those net deferred tax assets, including in the U.S. and most foreign jurisdictions. The Company continues to evaluate the realizability of all deferred tax assets on a jurisdictional basis as it relates to expected future earnings. Should the Company fail to achieve its expected earnings in the coming periods, it may be necessary to establish a valuation allowance against some or all of its deferred tax assets in those jurisdictions not currently subject to a valuation allowance.
11.    Subsequent Events
On November 10, 2020 the Company issued a notice of redemption to redeem $125.0 million of its outstanding 2021 Senior Notes, representing 63.1% of the aggregate outstanding principal amount. The redemption date will be December 11, 2020 and the redemption price will be equal to $1,000 per $1,000 principal amount of the 2021 Senior Notes being redeemed and will include accrued but unpaid interest to, but not including, the redemption date. Upon the redemption by the Company of the 2021 Senior Notes being redeemed, $73.2 million of 2021 Senior Notes will remain outstanding. See Note 6, "Debt," for further details on the 2021 Senior Notes.that was recorded during that period.
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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ThePlease read the following discussion should be read in conjunctionand analysis of our financial condition and results of operations together with the information contained in our unaudited condensed consolidated financial statements including theand related notes thereto.

included under Part I, Item 1 of this Quarterly Report on Form 10-Q.
The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In some cases, forward-looking statements can be identified by the use of terms such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “pro forma,” “seeks,” “should,” “will” or similar expressions. Forward-looking statements include our current assumptions, expectations or forecasts of future events.

TheseForward-looking statements are only predictions based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements. The forward-looking statements involve a number of risks and uncertainties. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that might cause such differences include, but are not limited to, those described in Exhibit 99.4 to the Form 8-K that we filed with the SEC on June 5, 2020 and those described under the heading "Risk Factors" in our quarterly report on Form 10-Q that we filed with the SEC on September 9, 2020, and include risks related to:
•macroeconomic pressures, including the effects of COVID-19 on consumer spending;
•the impact of COVID-19, including government restrictions, on our business and financial results;
•the impact of COVID-19 on costs and availability of capital;
•the cyclicality of the video game industry;
•our dependence on the timely delivery of new and innovative products from our vendors;
•the impact of technological advances in the video game industry and related changes in consumer behavior on our sales;
•our ability to keep pace with changing industry technology and consumer preferences;
•the economic, social and political conditions in the U.S. and certain international markets;
•the impact of international crises and trade restrictions and tariffs on the delivery of our products;
•our ability to obtain favorable terms from our suppliers;
•the international nature of our business;
•our dependence on sales during the holiday selling season;
•fluctuations in our results of operations from quarter to quarter;
•our ability to de-densify our global store base;
•our ability to renew or enter into new leases on favorable terms;
•the competitive nature of our industry;
•our ability to attract and retain executive officers and key personnel;
•the adequacy of our management information systems;
•our reliance on centralized facilities for refurbishment of our pre-owned products;
•our ability to react to trends in pop culture with regard to our sales of collectibles and our dependence on licensed products for a substantial portion of such sales;
•our ability to maintain security of our customer, employee or company information;
•potential harm to our reputation;
•our ability to maintain effective control over financial reporting;
•our vendors’ ability to provide marketing and merchandise support at historical levels;
•restrictions on our ability to purchase and sell pre-owned video games;
•potential decrease in popularity of certain types of video games;
•changes in our tariff, import/export regulations and global tax rate;
•potential future litigation and other legal proceedings;
•potential future actions by activist stockholders;
•changes in accounting rules and regulations; and
•our ability to comply with federal, state, local and international law.

All forward-looking statements included or incorporated by reference in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update or revise any of these forward-looking statements for any reason, whether as a result of new information, future events or otherwise after the date of this Quarterly Report on Form 10-Q, except as required by law.

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OVERVIEW
GameStop Corp. (“GameStop,” “we,” “us,” “our,” or the “Company”) is the world's largest video game retailer, which operates approximately 5,000 stores across ten countries,offers games, entertainment products and offers the best selection of newtechnology through its e-commerce properties and pre-owned video gaming consoles, accessories and video game titles, in both physical and digital formats. GameStop also offers fans a wide variety of POP! vinyl figures, collectibles, board games and more. Through GameStop's unique buy-sell-trade program, gamers can trade in video game consoles, games, and accessories, as well as consumer electronics for cash or in-store credit. Our consumer product network also includes www.gamestop.com and Game Informer® magazine, the world's leading print and digital video game publication.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. The fiscal yearsyear ending January 29, 2022 and the fiscal year ended January 30, 2021 ("fiscal 2020") and February 1, 2020 ("fiscal 2019") each consist of 52 weeks. All three and nine month periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods. The discussion and analysis of our results of operations refers to continuing operations unless otherwise noted. Our business, like that of many retailers, is seasonal, with the major portion of the net sales realized during the fourth fiscal quarter, which includes the holiday selling season.
Impact from COVID-19
Throughout 2020, we temporarily closed stores or limited store operations at various times across our four operating segments. During the first halfquarter of fiscal 2020, due to the COVID-19 pandemic, we temporarily closed our U.S. store locations to customer access, as well as closed store locations in Canada, Europe and New Zealand. These2021, temporary store closures beganwere limited to certain jurisdictions in late March 2020Europe and byCanada. During the endsecond quarter of fiscal June 2020, 98%2021, most of our stores globally were openin all jurisdictions returned to normal operations. However, with the public following the implementationresurgence of the highest level of health and safety protocols recommended by the federal and local health and governmental authorities. DuringCOVID-19 cases due to variants, we experienced some temporary closures in our Australian segment that persisted through 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, starting in late October 2020, 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 federal governmental authorities, while2021. As certain of our stores in Canada, Australia and Austria closed temporarily starting in early to mid-November. Although certain stores remain closed,experienced temporary closures during the nine months ended October 30, 2021, some of our stores in France, Ireland, Canadaoffered and Australia are offeringcontinue to offer curbside pick-up. We remain vigilant in our compliance with COVID-19 regulations across our operating regions, andregions.
While the gaming industry has not been as such have reverted a minor number of store operations in the United States in early November to curbside pick-up only.
During the period of temporary closures, we took several steps to continue to serve our customers via our omni-channel platformseverely impacted by enhancing our online capabilities and 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 the 39 weeks ended October 31, 2020, we incurred $23.3 million 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 useas certain other consumer businesses, we have experienced adverse impacts on our results of personal protective equipment at our stores, shared service centers and distribution centers across all geographies where we operate.
Theoperations during the nine months ended October 30, 2021. Factors impacted by 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 thatinclude, but are not withinlimited to, the following, many of which are beyond our control, including the following:control:
•the geographies impacted by the virus;
•changes in the economy, 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; and
•delays in the release of key video game titles; andtitles.
•a slowdown in the U.S.The COVID-19 pandemic remains an evolving situation and global economies,its future impact on all areas of our business remain unknown. The COVID-19 pandemic and the timingrelated responses of the post-pandemic economic recovery.
We continue to take steps to improvegovernments, customers, suppliers and other third parties may materially adversely impact our business, financial condition, results of operations and 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;
•concentrating capital spending on required maintenance or near-term high value strategic projects; and
•divesting non-strategic assets to free up cashflows. See Item 1A of Part II, "Risk Factors" for deployment to certain 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;additional information.
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BUSINESS PRIORITIES
GameStop has two long-term goals: delighting customers and delivering value for stockholders. We are evolving from a video game retailer to a technology company that connects customers with games, entertainment and a wide assortment of products. We are focused on offering vast product selection, competitive pricing and fast shipping – supported by high-touch customer service and a frictionless e-commerce and in-store experience. Accordingly, we prioritize long-term revenue growth and market leadership over short-term margins.
We are taking steps that include:
•reduced pay for certainIncreasing the size of our addressable market by growing our product catalog across consumer electronics, PC gaming, collectibles, toys and other employees by graduated amounts across mostcategories that represent natural extensions of the worldwide permanent workforce between 10% and 30% for 9 weeks; andour business;
•forewent merit pay increases for the majorityExpanding fulfillment operations to improve speed of delivery and service to our associates for fiscal 2020.customers;
See Note 2, "COVID-19 Impacts" for further details.•Building a superior customer experience, including by establishing a U.S.-based customer care operation, and;
Industry Overview
Growth•Strengthening technology capabilities, including by investing 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 experiencesystems, modernized e-commerce assets and add other entertainment capabilities. Consumer demand for gaming consoles are typically the highest in the early years of the cycle and the weakest in the latter years. The current generation of consoles include the Sony PlayStation 4 (launched in 2013), Microsoft Xbox One (launched in 2013) and the Nintendo Switch (launched in 2017). The Sony PlayStation 4 and Microsoft XBox One are nearing the end of their cycle as Sony and Microsoft have successfully launched their next generation consoles, the Sony PlayStation 5 and the Microsoft Xbox Series X, in November 2020.an expanded, experienced talent base.
The sale of video games delivered through digital channels and other forms of gaming continue to grow and take 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 e-commerce, in-store and website functionality to enable our customers to access digital content to facilitate the digital sales and delivery process. We plan toCompany will continue to invest in these types of processes and channelsgrowth initiatives, while continuing to grow our digital sales base and enhance our market leadership position in the video game industry and in the digital aggregation and distribution category.
In our discussion of the results of operations, we refer to comparable store sales, which isprioritize maintaining 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. Beginning in the first quarter of our fiscal year 2020, we refined the definition of comparable store sales to exclude stores that were closed for 14 consecutive days or more and where curbside delivery was not available to customers. Therefore, comparable sales results for the 13 and 39 weeks ended October 31, 2020 exclude stores that were closed for 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 metric used by management for internal reporting and analysis to measure performance of our stores. Comparable store sales reported in prior periods are not affected by this revision.
The calculation of comparable store sales compares the 13 and 39 weeks ended October 31, 2020 to the most closely comparable weeks for the 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 an omni-channel retailer that provides its consumers several ways to access its products.
BUSINESS STRATEGY
In May of 2019, we announced our multi-year transformation initiative, which we refer to as GameStop Reboot to position GameStop on the correct strategic path and fully leverage our unique position and brand in the video game industry. Our strategic plan is anchored on the following tenets.
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, 461 stores year-to-date 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 $315.9 reduction in reported Selling, General and Administrative costs year-to-date in fiscal 2020.
Build a frictionless digital ecosystem. Develop and deploy a frictionless consumer facing digital first omni-channel environment, including the recent relaunch and customer experience enhancements within GameStop.com, the launch of a
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completely new GameStop App, as well as the optimization of our retail store footprint to maximize our customer reach more broadly across all channels and provide them the full spectrum of content and access to products they desire, however, wherever and whenever they want to shop. Enhancements to the user shopping experience and improved omni-channel capabilities, including expanded delivery and payment options, yielded an increase in e-commerce sales of over 430% through the third fiscal quarter of 2020.
Become the social / cultural hub for gaming.Create the social and cultural hub for games and entertainment and expand GameStop’s addressable market through category and product expansion to offer the most comprehensive product offering across the GameStop omni-channel platform. Our customers are increasing their engagement across the spectrum of games, entertainment and technology and our focus remains to meet those expanding needs.
Transform vendor partnerships. Transform our vendor and partner relationships to unlock additional high-margin revenue streams through an expanded suite of product and service offerings to optimize the lifetime value of every customer.strong balance sheet.
Connected to our transformation efforts, we have incurred and may continue to incur increased labor costs, severance store closureexpenses, marketing costs, customer care costs, and expenses for consultants and advisors.consulting fees with third parties. See "Consolidated Results from Operations—Selling, General and Administrative Expenses" for further information.
We continually review and prioritize our capital needs and are committed to making investments in our infrastructure to drive our business plans and realize on our transformation initiatives. Key areas of 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; continuing to enhance service offerings to our customers; continuing to strengthen and deepen our information technology, analytics, marketing and e-commerce groups; and creating more flexible fulfillment options designed to improve our delivery capabilities and reduce our shipping costs. These and other investments are expected to, among other things, provide a seamless and compelling customer experience across our omni-channel retail platform.

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CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forthpresents certain statement of operations items (in millions) and as a percentage of net sales, forsales:
Three Months EndedNine Months Ended
October 30, 2021October 31, 2020October 30, 2021October 31, 2020
AmountPercent of Net SalesAmountPercent of Net SalesAmountPercent of Net SalesAmountPercent of Net Sales
Net sales$1,296.6 100.0 %$1,004.7 100.0 %$3,756.8 100.0 %$2,967.7 100.0 %
Cost of sales978.0 75.4 728.4 72.5 2,787.2 74.2 2,156.8 72.7 
Gross profit318.6 24.6 276.3 27.5 969.6 25.8 810.9 27.3 
Selling, general and administrative expenses421.5 32.5 360.4 35.9 1,170.7 31.2 1,095.1 36.9 
Asset impairments— — — — 0.6 — 4.8 0.2 
Gain on disposal of assets— — (21.1)(2.1)— — (32.4)(1.1)
Operating loss(102.9)(7.9)(63.0)(6.3)(201.7)(5.4)(256.6)(8.7)
Interest expense, net0.8 0.1 9.7 0.9 26.0 0.7 23.9 0.8 
Loss from continuing operations before income taxes(103.7)(8.0)(72.7)(7.2)(227.7)(6.1)(280.5)(9.5)
Income tax expense (benefit)1.7 0.1 (53.9)(5.4)6.1 0.2 14.4 0.5 
Net loss from continuing operations(105.4)(8.1)(18.8)(1.8)(233.8)(6.3)(294.9)(10.0)
Loss from discontinued operations, net of tax— — — — — — (0.9)— 
Net loss$(105.4)(8.1)%$(18.8)(1.8)%$(233.8)(6.3)%$(295.8)(10.0)%
The Three and Nine Months Ended October 30, 2021 Compared to the periods indicated:Three and Nine Months Ended October 31, 2020
13 Weeks Ended39 Weeks Ended
October 31, 2020November 2, 2019October 31, 2020November 2, 2019
AmountPercent of Net SalesAmountPercent of Net SalesAmountPercent of Net SalesAmountPercent of Net Sales
Net sales$1,004.7 100.0 %$1,438.5 100.0 %$2,967.7 100.0 %$4,271.9 100.0 %
Cost of sales728.4 72.5 997.4 69.3 2,156.8 72.7 2,960.5 69.3 
Gross profit276.3 27.5 441.1 30.7 810.9 27.3 1,311.4 30.7 
Selling, general and administrative expenses360.4 35.9 475.4 33.0 1,095.1 36.9 1,411.0 33.0 
Goodwill and asset impairments— — 11.3 0.8 4.8 0.2 375.2 8.8 
Gain on disposal of assets(21.1)(2.1)— — (32.4)(1.1)— — 
Operating loss(63.0)(6.3)(45.6)(3.1)(256.6)(8.7)(474.8)(11.1)
Interest expense, net9.7 0.9 6.0 0.5 23.9 0.8 20.7 0.5 
Loss from continuing operations before income taxes(72.7)(7.2)(51.6)(3.6)(280.5)(9.5)(495.5)(11.6)
Income tax (benefit) expense(53.9)(5.4)31.6 2.2 14.4 0.5 (6.2)(0.2)
Net loss from continuing operations(18.8)(1.8)(83.2)(5.8)(294.9)(10.0)(489.3)(11.4)
Loss from discontinued operations, net of tax— — (0.2)— (0.9)— (2.6)(0.1)
Net loss$(18.8)(1.8)%$(83.4)(5.8)%$(295.8)(10.0)%$(491.9)(11.5)%
Net Sales
We revised the categories of our similar products at the end of fiscal 2019. See Note 3, "Revenue," for further details. The following table sets forthpresents net sales by significant product category for the period indicated (dollars in millions):category:
 Three Months EndedNine Months Ended
 October 30, 2021October 31, 2020October 30, 2021October 31, 2020
Net
Sales		Percent of Net SalesNet
Sales		Percent of Net SalesNet
Sales		Percent of Net SalesNet
Sales		Percent of Net Sales
Hardware and accessories$669.9 51.7 %$413.4 41.2 %$1,983.0 52.8 %$1,368.1 46.1 %
Software434.5 33.5 444.4 44.2 1,229.0 32.7 1,247.9 42.0 
Collectibles192.2 14.8 146.9 14.6 544.8 14.5 351.7 11.9 
Total$1,296.6 100.0 %$1,004.7 100.0 %$3,756.8 100.0 %$2,967.7 100.0 %
 13 Weeks Ended39 Weeks Ended
 October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Net
Sales		Percent of Net SalesNet
Sales		Percent of Net SalesNet
Sales		Percent of Net SalesNet
Sales		Percent of Net Sales
Hardware and accessories$413.4 41.2 %$546.0 37.9 %$1,368.1 46.1 %$1,757.4 41.1 %
Software444.4 44.2 730.6 50.8 1,247.9 42.0 2,022.0 47.4 
Collectibles146.9 14.6 161.9 11.3 351.7 11.9 492.5 11.5 
Total$1,004.7 100.0 %$1,438.5 100.0 %$2,967.7 100.0 %$4,271.9 100.0 %
NetThe following tables present net sales by reportable segment in U.S. dollars were as follows (in millions):
13 Weeks Ended
October 31, 2020November 2, 2019
Net
Sales		Percent of Net SalesComparable Store SalesNet
Sales		Percent of Net SalesComparable Store Sales
United States$664.5 66.1 %(27.1)%$987.5 68.6 %(24.0)%
Canada55.95.6 (25.7)79.8 5.5 (23.7)
Australia111.211.1 0.6 117.0 8.2 (14.7)
Europe173.117.2 (27.1)254.2 17.7 (23.7)
Total$1,004.7 100.0 %(24.6)%$1,438.5 100.0 %(23.2)%

segment:
Three Months Ended
October 30, 2021October 31, 2020
Net
Sales		Percent of Net SalesNet
Sales		Percent of Net Sales
United States$875.5 67.5 %$664.5 66.1 %
Canada68.35.3 55.9 5.6 
Australia127.19.8 111.2 11.1 
Europe225.717.4 173.1 17.2 
Total$1,296.6 100.0 %$1,004.7 100.0 %
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39 Weeks EndedNine Months Ended
October 31, 2020November 2, 2019October 30, 2021October 31, 2020
Net
Sales		Percent of Net SalesComparable Store SalesNet
Sales		Percent of Net SalesComparable Store SalesNet
Sales		Percent of Net SalesNet
Sales		Percent of Net Sales
United StatesUnited States$2,009.3 67.7 %(23.7)%$3,010.7 70.5 %(16.3)%United States$2,636.9 70.2 %$2,009.3 67.7 %
CanadaCanada137.54.6 (18.9)215.4 5.0 (15.5)Canada193.05.1 137.5 4.6 
AustraliaAustralia373.912.6 20.8 339.8 8.0 (9.1)Australia373.110.0 373.9 12.6 
EuropeEurope447.015.1 (18.5)706.0 16.5 (15.1)Europe553.814.7 447.0 15.1 
TotalTotal$2,967.7 100.0 %(18.7)%$4,271.9 100.0 %(15.5)%Total$3,756.8 100.0 %$2,967.7 100.0 %
Net Sales
Net sales decreased $433.8 million (30.2%) and $1,304.2 million (30.5%), during the 13 and 39 weeks ended October 31, 2020, respectively, compared to their prior year periods. Comparable store sales decreased 24.6% and 18.7% during the current quarter and year-to-date periods, respectively. The decrease in net sales for the quarter and year-to-date periods was primarily attributable to the combined impacts of temporary store closures to customer traffic due to the COVID-19 pandemic and the cyclicality of new hardware consoles as our third fiscal quarter was the final period prior to the launch of new generation of video game consoles from Microsoft and Sony. Although the substantial majority of our stores were open duringFor the third quarter of fiscal 2020, the negative impact related2021, net sales increased $291.9 million or 29.1% compared to the ongoing COVID-19 pandemic continued to affect our store operations in all of our operating segments. This includes our Australia stores which were not affected by temporary closures duringsame prior year period and increased $789.1 million or 26.6% for the first half of fiscal 2020, but during the third fiscal quarter approximately 15% of Australian stores temporarily closed for approximately four weeks. For the 39 weeksnine months ended October 31, 2020 we experienced declines2020. During the third quarter of 2021, net sales in theour United States, Canada, Europe, and New Zealand, which were partially offsetAustralia segments increased by the performance in our Australia segment which increased in sales by 10.0% as stores in Australia remained open during for the substantial majority of the year-to-date period. These declines were partially offset by the increase in our e-commerce sales, which increased 257.4% and 432.9% in the current quarter and year-to-date 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.
Net sales during the 13 weeks ended October 31, 2020 in our United States, Canada, Australia and Europe segments declined by 32.7%31.8%, 29.9%22.2%, 5.0% and 31.9%30.4%, 14.3%, respectively, when compared to the 13 weeks ended November 2, 2019. Comparable store sales insame period last year. During the United States, Canada and Europe decreased by 27.1%, 25.7% and 27.1%, respectively, while comparable store sales increased in the Australia segment by 0.6% primarily due to the same factors described above.
Net sales during the 39 weeksnine months ended October 31, 202030, 2021, net sales in our United States, Canada, and Europe segments declinedincreased by 33.3%31.2%, 36.2% and 36.7%40.4%, 23.9%, respectively, while net sales in our Australia segment increased 10.0%, whenwere comparable to the nine months ended October 31, 2020.
Our increase in net sales for the third quarter and nine months ended October 30, 2021 was primarily attributable to ongoing demand of the new video game consoles from Sony and Microsoft and continued sell-through of the Nintendo gaming product lines, and an increase in store traffic compared to the 39 weeks ended November 2, 2019. Comparablesame period last year. The abrupt temporary store salesclosures we experienced beginning in March of 2020 due to the COVID-19 pandemic, affected our prior period store operations in the United States, Canada and Europe decreased by 23.7%, 18.9% and 18.5%, respectively, while comparable store sales increased inAustralia remained open during the Australia segment by 20.8%, primarily due to the same factors described above.nine months ended October 31, 2020.
Gross Profit
Gross profit decreased 37.4% and 38.2% forincreased $42.3 million, or 15.3% during the 13 and 39 weeks ended October 31, 2020, respectively,third quarter of 2021 compared to the prior year periods, primarily due to the decrease in sales.same period last year. Gross profit as a percentage of net sales decreaseddeclined to 27.5% and 27.3% in the current quarter and year-to-date periods24.6%, or 290 basis points, compared to 30.7% and 30.7%27.5% in the prior year quarter. Gross profit increased 19.6%, or $158.7 million during the nine months ended October 30, 2021, compared to the same prior year period. Gross profit as a percentage of net sales declined to 25.8%, or 150 basis points, compared to 27.3% in the prior year.
Our gross profit for the third quarter and year-to-date periods, respectively, primarily due tonine months ended October 30, 2021 reflects a shift in product mix totowards higher dollar lower margin products includingcategories such as new console hardware as stores reopened to foot traffic, and increased freight and credit card fees associated with the shift to new hardware and accessories within our hardware and accessories product category as well as an increase in industry-wide freight costs and credit card processing fees as a result of higher penetration of e-commerce sales. Additionally, the quarter-to-date period was partially offset by a shift in product mix to collectibles.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") decreased $115.0increased $61.1 million (24.2%) and $315.9 million (22.4%)or 17.0% for the 13 and 39 weeks ended October 31, 2020, respectivelythird quarter of 2021, compared to the same prior year periods. Theperiod. Through the nine months ended October 30, 2021, SG&A expenses increased $75.6 million or 6.9% compared to the same prior year quarter and year-to-date periods included $14.4 million and $47.5 million, respectively,period. SG&A expenses increased as a result of the impact the COVID-19 pandemic had on our store expenses in prior year as we experienced temporary store closures beginning in March of 2020. Contributing to the increase in SG&A expenses are costs associated with our transformation initiativesinto a technology company, which include increased labor costs as the Company in-sources talent and severance. Excluding these charges,expands its capabilities to support growth, severance expenses, increased marketing costs, and customer care costs. We expect to continue to incur costs associated with our transformation initiatives.
SG&A expenses as a percentage of sales improved to 32.5% during the decrease inthird quarter of 2021 compared to 35.9% during the third quarter of 2020. SG&A for bothexpenses as a percentage of sales also improved to 31.2% during the quarter and year-to-date periods was primarily duenine months ended October 30, 2021 compared to 36.9% during the impactnine months ended October 31, 2020. We continue to benefit from lower store occupancy costs as a percent of the extensivesales driven by our cost reduction initiatives we have undertaken,in 2020 and to a lesser extent, lower variable expenses2021. These net reductions include 449 permanent store closures since October 31, 2020 as a resultpart of lower sales volume. See Note 2, "COVID-19 Impacts" for further details.the de-densification of our store base.

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Goodwill and Asset Impairments
Through the nine months ended October 30, 2021, we recognized $0.6 million in asset impairment charges related to our right-of-use lease assets.
During the 39 weeksnine months ended October 31, 2020, we recognized asset impairment charges totaling $4.8 million. No asset impairment charges were recognized during the 13 weeks ended October 31, 2020. The charges consist of $3.2 million in impairment charges related to our formerly-owned corporate aircraft, which we sold in the second fiscal quarter of 2020 and $1.6 million in impairment charges associated with store-level assets.
Interest Expense, Net
During the 13 and 39 weeks ended November 2, 2019 we recognized asset impairment charges totaling $11.3third quarter of 2021, interest expense, net was $0.8 million, consistingwhich decreased by $8.9 million compared to the same period in 2020 primarily due to the voluntary early redemption of a $7.7 million impairmentthe outstanding balance of our corporate aircraft,2023 Senior Notes in the first quarter of 2021.
Through the nine months ended October 30, 2021, interest expense, net was $26.0 million, which increased by $2.1 million when compared to the nine months ended October 31, 2020. The increase in interest expense was classified as held for sale as of November 2, 2019, and $3.6 million in impairment charges related to store-level property and equipment. During the 39 weeks ended November 2, 2019, we recognized a goodwill impairment charge totaling $363.9 million, primarily as a result of a decline in our market capitalization. As a result of the goodwill impairment charge, we have no remaining goodwill.$17.8 million make-whole premium paid upon the voluntary early redemption of the outstanding balance of our 2023 Senior Notes.
Gain on Sale of AssetsIncome Tax Expense
During the 13 weeks ended October 31, 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 rentWe recognized income tax expense 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 will be used for general corporate purposes. As a result of these transactions, a gain on sale of assets of $21.1 million was recognized and is included in our unaudited condensed consolidated statement of operations for the 13 weeks ended October 31, 2020.
During the second fiscalthird quarter of 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 the 39 weeks ended October 31, 2020.
The net proceeds from the sale of these assets will be used for general corporate purposes. As a result of the transactions that occurred during the second and third fiscal quarters of 2020, a gain on sale of assets of $32.4 million was recognized and is included in our unaudited condensed consolidated statement of operations for the 39 weeks ended October 31, 2020.
See Note 5, "Leases," for further information regarding the sale and leaseback of these facilities.
Interest Expense, Net
Interest expense, net increased by $3.7 million (61.7%) during the 13 weeks ended October 31, 20202021 compared to the 13 weeks ended November 2, 2019, primarily due to an increase in interest expense as a result of the increase in the interest rate associated with the exchange of $216.4 million aggregate principal amount of our 6.75% senior notes due in 2021 for our 10.0% senior notes due in 2023 as well as a decrease in interest income primarily as a result of a reduction in interest rates.
Interest expense, net increased by $3.2 million (15.5%), during the 39 weeks ended October 31, 2020 compared to the 39 weeks ended November 2, 2019, primarily due to a decrease in interest income primarily as a result of a reduction in interest rates. The decrease in interest income was offset by a decrease in interest expense as a result of the early redemption of our $350.0 million 2019 Senior Notes on April 4, 2019, the repurchase of $53.6 million and $6.8 million aggregate principal amount of our 2021 Senior Notes during fiscal 2019 and fiscal 2020, respectively, offset by an increase in interest expense associated with the exchange of $216.4 million aggregate principal amount of our 6.75% senior notes due in 2021 for our 10.0% senior notes due in 2023.
Income Tax (Benefit) Expense
We recognized income tax benefit of $53.9 million for the 13 weeks ended October 31, 2020 compared to an income tax expense of $31.6 million for the 13 weeks ended November 2, 2019.same period in 2020. Our effective income tax rate increaseddecreased to (1.6)% for the third quarter of 2021 compared to 74.1% for the 13 weeks ended October 31, 2020 compared to (61.2)% for the 13 weeks ended November 2, 2019.third quarter of 2020. The increasechange in the effective income tax rate compared to the prior year quarter was primarily driven by a change in the tax status of certain foreign entities, sale and leaseback transactions, the impact ofbenefits related to the CARES Act includingthat were recorded in the prior year quarter. Through the nine months ended October 30, 2021, we recognized income tax benefits associated with the availabilityexpense of a five-year carryback period for certain current year tax losses, and the relative mix of earnings across the jurisdictions within which we operate.
We recognized$6.1 million compared to an income tax expense of $14.4 million for the 39 weeks ended October 31, 2020 compared to an income tax benefit of $6.2 million for the 39 weeks ended November 2, 2019.same period in 2020. Our effective income tax rate decreasedincreased to (2.7)% compared to (5.1)% for the 39 weeksnine months ended October 31, 2020 compared to 1.3% for the 39 weeks ended November 2, 2019. The decrease in the effective2020.
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income tax rate comparedPart I, "Notes to the prior year quarter was 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, sale and leaseback transactions, 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, and the relative mix of earnings across the jurisdictions within which we operate.
See Consolidated Financial Statements", Note 10,9, "Income Taxes," for furtheradditional information.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of liquidity are cash from operations, cash on hand, and borrowings from the capital markets, which include our revolving credit facilities. As of October 31, 2020,30, 2021, we had total unrestricted cash on hand of $445.9 million$1.4 billion and an additional $175.4$202.4 million of available borrowing capacity under our revolving credit facilities.
Availability On March 15, 2021, we repaid our outstanding borrowings of $25.0 million under our asset-based revolving credit facilities, which was increased duringfacility due November 2022 ("Revolver").
During the 13 weeksnine months ended October 31, 2020, as described30, 2021, we sold an aggregate of 8,500,000 shares of our common stock under our at-the market equity offering program (the "ATM Transactions"). We generated $1.68 billion in aggregate gross proceeds from sales under the SourcesATM Transactions, and paid an aggregate of Liquidity section below, provides us$10.1 million in commissions to the sales agent, among other legal and administrative fees. These commissions and fees are recognized in additional liquidity throughout the course of the year to fund our operations. Basedpaid-in capital on our current operating plans, we believe that available cash balances, cashConsolidated Balance Sheets and selling, general and administration expenses in our Consolidated Statements of Operations. The net proceeds generated from sales under the ATM Transactions have been, and are expected to be, used for working capital and general corporate purposes, including repayment of indebtedness, funding our operating activities and funds available under our revolving credit facilities together will provide sufficient liquidity to fund our operations and transformation, growth initiatives and support corporateproduct category expansion efforts, and capital allocation programs for the next 12 monthsexpenditures and the foreseeable future. While factors related to COVID-19 have negatively impactedsatisfaction of our results fortax withholding obligations upon the vesting of shares of restricted stock held by our executive officers and other employees.
Additionally, during the first quarter ended May 2, 2020, results forof 2021, we repaid the remaining $73.2 million aggregate principal amount of our then outstanding 6.75% Senior Notes due 2021 ("2021 Senior Notes") and the remaining $216.4 million aggregate principal amount of our then outstanding 10.00% Senior Notes due 2023 ("2023 Senior Notes"). In the second quarter ended Augustof 2021, at the request of Micromania SAS, the six separate unsecured term loans held by our French subsidiary, Micromania SAS, for a total of €40.0 million ($46.2 million as of October 30, 2021) were extended for five years. See Item 1 2020 and third quarter ended October 31, 2020, as comparedof Part I, "Notes to our first quarter of fiscal 2020, have improved as we continued to achieve the cash flow benefits from cost savings and expense reduction initiatives, as well as disciplined working capital management which supports an improved liquidity position.Consolidated Financial Statements", Note 5, "Debt," for further details on the debt transactions.
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. Specific to our 2021 Senior Notes, on July 6, 2020 we issued $216.4 million aggregate principal amount of 2023 Senior Notes in exchange for an equal aggregate principal amount of our 2021 Senior Notes. See Note 6, "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 part of our previously announced GameStop Reboot profit improvement initiative, we are evaluating future strategic and operating alternatives for certain of our operations under consideration, primarily relating to lease and severance obligations and accelerated depreciation and amortization, would not be material to our liquidity, results of operations or financial condition.
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 seekOur vendors have requested and may continue 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 ofrequest credit support collateral we provide to select vendors for our inventory purchase obligations. Our continued provision of collateral,obligations and the levels of such collateral will depend on a variety of factors including our inventory
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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, "General Information — Restricted Cash" for further details.
On November 10, 2020, the Company issued a notice to redeem, on December 11, 2020, $125.0 million in aggregate principal amount of 2021 Senior Notes. See Note 11, "Subsequent Events," for further details.
Cash Flows
During the 39 weeks ended October 31, 2020, cash used in operations was $41.1 million, compared to $654.8 million during the 39 weeks ended November 2, 2019. The decrease in cash used in operations of $613.7 million was primarily attributable to the optimization of inventory and accounts payable levels as we have focused our operational process to optimize the cash conversion cycle and carry more efficient levels of inventory.
Cash provided by investing activities increased to $63.3 million during the 39 weeks ended October 31, 2020 compared to cash used in investing of $56.9 million during the 39 weeks ended November 2, 2019. The $120.2 million increase in cash provided by investing activities is 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, "General Information," and Note 5, "Leases" for further information.
During the 39 weeks ended October 31, 2020, cash provided by financing activities was $65.5 million, consisting primarily of $47.1 million in proceeds from term loans entered into by our French subsidiary, Micromania SAS and a net $25.0 million draw down on our Revolver. During the 39 weeks ended November 2, 2019, cash used in financing activities was $622.7 million,
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consisting primarily of the redemption of our $350 million in aggregate principal of 5.5% unsecured senior notes, repurchases of our common stock totaling $176.9 million, open market repurchases of $53.6 million of our 2021 Senior Notes and dividends paid on our common stock of $40.5 million.
Sources of LiquidityLiquidity; Uses of Capital
We utilize cash generated from operations and have funds available to us under our asset-basedthe Revolver 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 timeU.S.and Government Prime money market funds and cash deposits with commercial banks.
Our asset-basedThrough November 3, 2021, we maintained the Revolver haswith a maximum borrowing base capacity of $420 million and a maturity date of November 2022. OurThe Revolver hasincluded a $200 million expansion feature, anda $100 million letter of credit sublimit, and allowsallowed 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 London Interbank Offered ("LIBO") rate loans, range from 1.25% to 1.50%. The Revolver is secured by substantially allAs of the assetsend of the Companythird quarter of 2021, based on our borrowing base and the assetsamounts reserved for outstanding letters of its domestic subsidiaries. We are required to pay a commitment fee of 0.25% for any unused portion of the total commitment under the Revolver. As of October 31, 2020, our applicable margins were 0.25% for prime rate loans and 1.25% for LIBO rate loans. Also as of October 31, 2020,credit, total availability under the Revolver after giving effect to the Availability Reduction was $152.1$202.4 million. As of October 30, 2021, no loan amounts were outstanding under the Revolver and $57.9 million with outstanding borrowings of $25.0 million and outstanding standby letters of credit of $59.8 million.
The agreement governing our Revolverwere issued 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 covenantsundrawn under the indentures governing the 2021 Senior Notes and 2023 Senior Notes and the agreement governing our Revolver.
As of October 31, 2020, ourOn November 3, 2021, Senior Notes and 2023 Senior Notes had an aggregate principal amount outstanding of $198.2 million and $216.4 million, respectively. Additionally, as of October 31, 2020, our term loans entered into by our French subsidiary, Micromania SAS, had an aggregate principal balance of €40.0 million ($46.6 million as of October 31, 2020).
See Note 6, “Debt,” to our unaudited consolidated financial statements.
Our French subsidiary, Micromania SAS, also maintains a credit facility of €20.0 million ($23.3 million as of October 31, 2020) that allows it to obtain short term loans of 10 to 93 days in duration to support its working capital needs. The commitments expire in January 2021. Loans made under the credit facility accrue interest at a variable rate tied to the Euro Interbank offered Rate plus an applicable margin of 1.5% and are secured by a pledge of the bank account from which repayments of the loans would be made. No amounts have been drawn under this facility through October 31, 2020.
In August 2020, we entered into an asset-based secured revolving credit facility (the "New Revolver"), which replaces the fourth amendment (“Fourth Amendment”) to the credit agreement governing ourRevolver. The New Revolver (“Credit Agreement”) giving effect to certain amendments, which are incorporated above and include, but are not limited to the following:provides for a borrowing capacity of $500 million with a maturity date of November 3, 2026.
•Reduced the amount of the excess availability trigger that determines whether the Company is subject to a fixed charge coverage ratio covenant of 1.0:1.0Separate 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 the issuances of letters of credit under the Credit Agreement from $50 million to $100 million; and
•Increased the amount of letters of credit debt 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.
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. WeAs of October 30, 2021, we had $90.2$17.1 million of outstanding letters of credit and other bank guarantees under facilities outside of the Revolver.
We may also fund our growth capital needs, as circumstances warrant,See Item 1 of Part I, "Notes to the Consolidated Financial Statements", Note 5, "Debt," for additional information.
Cash Flows
During the nine months ended October 30, 2021, cash flows from salesoperating activities were an outflow of equity securities.$324.0 million, compared with an outflow of $41.1 million during the same period last year. The timing and amount of any equity sales would depend on,increase in cash used in operations was primarily attributable to an increase in merchandise inventory levels when compared to prior year to, among other factors,things, mitigate the full impact of global supply chain issues. The increase in merchandise inventory levels was accompanied by an increase in associated payables.
Cash flows from investing activities were an outflow of $41.1 million during the nine months ended October 30, 2021 compared to an inflow of $63.3 million during the same period last year. We used cash from investing activities for continued technological investments as well as investments in two fulfillment centers in the current year. We received proceeds in the prior year in connection with the sale and leaseback of our capital needscorporate headquarters, ancillary office space and alternative sources and costs of capital available to us, market perceptions about us,a nearby refurbishment center in Grapevine, Texas and the then current trading pricesale of our corporate aircraft.
Cash flows from financing activities were an inflow of $1,203.7 million during the nine months ended October 30, 2021 compared to an inflow of $65.5 million during the same period in the prior year.
During the nine months ended October 30, 2021, we received $1.673 billion in aggregate net proceeds from the sale of shares of our common equity.stock in the ATM transactions, net of approximately $10.1 million in fees paid to the sales agent. We repaid at maturity $73.2 million of our outstanding 2021 Senior Notes, repaid $25.0 million of our outstanding loan borrowings under the Revolver and completed the voluntary early redemption of our outstanding 2023 Senior Notes for an aggregate of $234.2 million inclusive of a $17.8 million make-whole premium. In addition, we paid $136.6 million for withholding obligations upon the vesting of shares of restricted stock granted during the nine months ended October 30, 2021.
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The cash inflow during the nine months ended October 31, 2020 was primarily due to 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.
CRITICAL ACCOUNTING POLICIES
Our unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and do not include allexclude certain disclosures required under GAAP for complete consolidated financial statements. Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these consolidated financial statements. For a summary of significant accounting policies and the means by which we develop estimates thereon, see “Part II—Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20192020 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies from those included in our 20192020 Annual Report on Form 10-K.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
See Item 1 of Part I, "Notes to the Consolidated Financial Statements", Note 12, "Summary of Significant Accounting Policies" to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recent accounting
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pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
We had no material off-balance sheet arrangements as of October 31, 2020.30, 2021 other than those disclosed in Item 1 of Part I, "Notes to the Consolidated Financial Statements", Note 5, "Debt" and Note 6, "Commitments and Contingencies" of our consolidated financial statements.
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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's quantitative disclosures about marketour risk factors as set forth in its 2019Item 1A. Risk Factors in our 2020 Annual Report on Form 10-K, except as described below.
The impact of the COVID-19 pandemic both in the United States and globally continues to cause uncertainty and volatility in financial markets, including interest rates and foreign currency exchange rates. The outbreak is expected to have a continued adverse impact on market conditions for the foreseeable future and to trigger a period of global economic slowdown with no known duration. See further discussion in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”10-K.
ITEM 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company'sOur disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that the information required to be discloseddisclosures in the reports that it fileswe file or submitssubmit 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 itsour principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The Company'sOur principal executive officer and principal financial officer, with assistance from other members of management, have reviewed the effectiveness of the Company'sour disclosure controls and procedures as of the end of the period covered by this report and, based on that evaluation, determined that itsour disclosure controls and procedures were effective as of October 31, 202030, 2021 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
In response to the COVID-19 pandemic, the CompanyThere has required certain employees, some of whom are involvednot been any change in the operation of the Company's internal controls over financial reporting, to work from home. Despite this change, there have been no changes in the Company’sour internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during theour third quarter ended October 31, 2020 that havehas materially affected, or areis reasonably likely to materially affect, the Company’sour internal control over financial reporting. The Company is continually monitoring and assessing the impact of COVID-19 on its internal controls to minimize any impact it may have on their design and operating effectiveness.
PART II — OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
The matters described in Item 1 of Part I, "Notes to the Consolidated Financial Statements", Note 6 "Commitments and Contingencies - Legal Proceedings" in this Quarterly Report on Form 10-Q are incorporated by reference.

ITEM 1A.    RISK FACTORS
An investment in our company involves a high degree of risk. You should carefully consider the risks below, together with the other information contained in this report and other filings we make with the Securities and Exchange Commission ("SEC"), before you make an investment decision with respect to our company. The risks described below are not the only ones facing us. Additional risks not presently known to us, or that we consider immaterial, may also impair our business operations. Any of the following risks could materially adversely affect our business, operating results or financial condition, and could cause a decline in the trading price of our Class A Common Stock and the value of your investment.
Risks Related to Our Ability to Grow Our Business
Macroeconomic pressures in the markets in which we operate, including, but not limited to, the effects of the COVID-19 pandemic, may adversely affect consumer spending and our financial results.
To varying degrees, our products are sensitive to changes in macroeconomic conditions that impact consumer spending. As a result, consumers may be affected in many different ways, including for example:
•their determination of whether or not to make a purchase;
•their choice of brand, model or price-point; and
•how frequently they upgrade or replace their products.
Real GDP growth, consumer confidence, the COVID-19 pandemic discussed in the following risk factor, inflation, employment levels, oil prices, interest rates, tax rates, housing market conditions, foreign currency exchange rate fluctuations, costs for items such as fuel and food and other macroeconomic trends can adversely affect consumer demand for the products and services that we offer. Geopolitical issues around the world and how our markets are positioned can also impact the macroeconomic conditions and could have a material adverse impact on our financial results.
The impact of the COVID-19 pandemic has had, and is expected to continue to have, an adverse effect on our business and our financial results.
The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic has had and is expected to continue to have an adverse effect on our business and financial performance. The extent of the impact of the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted.
We have been, and may continue to be, subject to store closure requirements and other operation restrictions in the future with respect to some or all of our physical locations for prolonged periods of time due to, among other factors, evolving and stringent public health directives, quarantine policies, social distancing measures, or other governmental restrictions, which could have a
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further material impact on our sales and profits. In addition, Covid-19 testing and vaccination requirements may impact our ability to hire and retain employees, which could in turn impact our ability to operate our physical locations.
Consumer fears about exposure to the coronavirus may continue, which will adversely affect traffic to our stores. Consumer spending generally may also be negatively impacted by general macroeconomic conditions and consumer confidence, including the impacts of any recession, resulting from the COVID-19 pandemic or other economic events. This may negatively impact sales at our stores and on our websites. Any reduction in customer visits to our stores, and/or spending at our stores or on our websites, will likely result in a loss of sales and profits and other material adverse effects.
The COVID-19 pandemic has impacted and could continue to impact our supply chain for products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured or held for distribution. We have also seen and could continue to see significant disruptions of the operations of our logistics service providers, delays in shipments and negative impacts to pricing and availability of certain of our products. Certain “big box” retailers with which we compete in the gaming market remained open during the shelter-in-place phase of the pandemic, and we believe this allowed such competitors to gain market share.
In addition, we have incurred, and may continue to incur costs in our response to the COVID-19 pandemic that have been and could be significant in total, including, but not limited to, costs incurred to implement operational changes adopted in response to the COVID-19 pandemic and certain payments to, or other costs related to, associates who were not working as a result of the pandemic. If we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business in the future.
We have taken certain actions and may take additional actions with respect to many of our existing leases during the COVID-19 pandemic, including negotiating with landlords for rent abatement or deferral, terminating certain leases, or discontinuing rent payments, which may subject us to legal, reputational and financial risks. We can provide no assurances that any rent deferrals or abatements will be provided to us.
The extent of the impact of the COVID-19 pandemic on our business and financial results will also depend on future developments, including the duration and spread of the pandemic, the implementation or recurrence of shelter in place or similar orders in the future, its impact on the financial markets in which we operate and spread to other regions, new information that may emerge concerning the severity of the coronavirus and the related impact on consumer confidence and spending, all of which are highly uncertain. Therefore, we cannot reasonably estimate the full extent of the COVID-19 pandemic’s impact on our business and financial results.
Economic, social and political conditions or civil unrest in the U.S. and in certain international markets could adversely affect demand for the products we sell and the ability of our stores to remain open.
Sales of our products involve discretionary spending by consumers. Consumers are typically more likely to make discretionary purchases, including purchasing video game products, when there are favorable economic conditions. Consumer spending may be affected by many economic and other factors outside our control. Some of these factors include consumer disposable income levels, consumer confidence in current and future economic conditions, levels of employment, consumer credit availability, consumer debt levels, inflation, and the effect of weather, natural disasters, public health crises, including the COVID-19 pandemic and the related reduced consumer demand, decreased sales and widespread temporary closures. Adverse economic changes in any of the regions in which we sell our products could reduce consumer confidence. The extent to which the COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Socio-political factors, such as civil unrest or other economic or political uncertainties that contribute to consumer unease or harm to our store base, may also result in decreased discretionary spending. These and other social, political and economic factors could adversely affect demand for our products or cause certain of our stores to close, which would negatively impact our business, results of operations and financial condition.
The video game industry has historically been cyclical and is affected by the introduction of next-generation consoles, which could negatively impact the demand for existing products or our pre-owned business.
The video game industry has historically been cyclical in nature in response to the introduction and maturation of new technology. Following the introduction of new video game platforms, sales of these platforms and related software and accessories generally increase due to initial demand, while sales of older platforms and related products generally decrease as customers migrate toward the new platforms. In addition, the features of new consoles or changes to the existing generations of consoles, including any future restrictions or conditions or the ability to play prior generation video games on such consoles, may adversely affect our pre-owned business. A new console cycle began with the launch of the Sony PlayStation 5 in November 2020, the Microsoft Xbox Series X in November 2020, and the Nintendo Switch in March 2017.
The COVID-19 pandemic could continue to cause material disruptions or delays in our supply chains that develop, manufacture and distribute new consoles and other products we sell. Such disruptions could result in lower levels of sales of next generation consoles as well as the accompanying video games and other products we sell, which could have a material adverse impact on our financial results.
We depend upon the timely delivery of new and innovative products from our vendors.
We depend on manufacturers and publishers to deliver video game hardware, software, and consumer electronics in quantities sufficient to meet customer demand. In addition, we depend on these manufacturers and publishers to introduce new and innovative products and software titles to drive industry sales. We have experienced sales declines in the past due to a reduction
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in the number of new software titles available for sale. Any material delay in the introduction or delivery, or limited allocations, of hardware platforms or software titles could result in reduced sales. Any reduction in allocation of new hardware platforms or titles by vendors in preference to competitors, such as big box retailers, could have a material adverse impact on our financial results.
Disruptions and delays in our supply chains as a result of severe weather, natural disasters, information technology upgrades, operating issues, public health crises, pandemics, including the COVID-19 pandemic, or other unanticipated events could continue to adversely impact manufacturers’ and publishers’ ability to meet our customer demand. Additionally, the prioritization of shipments of certain products as a result of the pandemic could cause delays in the shipment or delivery of our products. Such disruptions could result in reduced sales.
Technological advances in the delivery and types of video games and PC entertainment hardware and software, as well as changes in consumer behavior related to these new technologies, have lowered and may continue to lower, our sales.
The current consoles from Sony, Nintendo, and Microsoft have facilitated download technology. In addition, Microsoft and Sony sell disc-less consoles that are currently available to consumers. Downloading of video game content to the current generation video game systems continues to grow and take an increasing percentage of new video game sales. As a result of quarantine policies and social distancing measures enacted in response to the COVID-19 pandemic, consumers have increased video game content downloads. If consumers’ preference for downloading video game content continues to increase or these consoles and other advances in technology continue to expand our customers’ ability to access and download the current format of video games and incremental content for their games through these and other sources, our customers may no longer choose to purchase video games in our stores or continue to reduce their purchases in favor of other forms of game delivery. As a result, our business and results of operations may be negatively impacted.
If we fail to keep pace with changing industry technology and consumer preferences, we will be at a competitive disadvantage.
The interactive entertainment industry is characterized by swiftly changing technology, evolving industry standards, frequent new and enhanced product introductions, rapidly changing consumer preferences and product obsolescence. Video games are now played on a wide variety of mediums, including video game consoles, personal computers, mobile phones, tablets, social networking websites and other devices. Browser, mobile and social gaming is accessed through hardware other than the consoles and traditional hand-held video game devices we currently sell.
To continue to compete effectively in the video game industry, we must respond effectively to market and technological changes and understand their impact on our customers’ preferences. It may take significant time and resources to respond to these technological changes and changes in consumer preferences. Our business and results of operations may be negatively impacted if we fail to keep pace with these changes.
International events could delay or prevent the delivery of products to our suppliers.
Our suppliers rely on foreign sources, primarily in Asia, to manufacture a portion of the products we purchase from them. As a result, any event causing a disruption of imports, including natural disasters, public health crises, including the ongoing COVID-19 pandemic, or the imposition of import or trade restrictions in the form of tariffs or quotas could increase the cost and reduce the supply of products available to us, which may negatively impact our business and results of operations. Furthermore, the COVID-19 pandemic has resulted in work stoppages at certain suppliers that are part of our supply chain. We have experienced shortages in supply as a result of the interruptions, but if the work stoppages or raw material supply were to be prolonged or expanded in scope, there could be resulting supply shortages which could impact our ability to import certain products on schedule and, accordingly, could have an adverse effect on our business, financial condition and results of operations.
Our ability to obtain favorable terms from our suppliers and service providers may impact our financial results.
Our financial results depend significantly upon the business terms we can obtain from our suppliers and service providers, including competitive prices, unsold product return policies, advertising and market development allowances, freight charges and payment terms. We purchase substantially all of our products directly from manufacturers, software publishers and, in some cases, distributors. Our largest vendors are Nintendo, Sony, Microsoft, U&I Entertainment and Ubisoft Entertainment, which collectively accounted for a majority of our new product purchases in fiscal 2020. If our suppliers and service providers do not provide us with favorable business terms or allocate reduced volumes of their products to us, we may not be able to offer products to our customers in sufficient volumes or at competitive prices. Vendors may request credit support which could require us to either use cash on hand or collateralize letters of credit with restricted cash or other credit support mechanisms, which would reduce our liquidity available for other purposes.
We depend on third-party delivery services to deliver products to our retail locations, processing centers and customers on a timely and consistent basis, and deterioration in our relationship with these third-party providers or increases in the fees that they charge could reduce our margins, harm our reputation and adversely affect our business and financial condition.
We rely on third parties for the transportation of products and we cannot be sure that these relationships will continue on terms favorable to us, or at all. Delivery and shipping costs have increased from time to time and may continue to increase, and we may not be able to pass these costs directly to our customers. Any increased delivery and shipping costs could harm our business, prospects, financial condition and results of operations by increasing our costs of doing business and reducing our margins, which would negatively affect our operating results. As we continue to reduce the number of our retail locations and increase our e-commerce capabilities, we expect our reliance on third party delivery services to increase.
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In addition, if our relationships with these third parties, especially the carriers we rely upon for the majority of our shipping needs, are terminated or impaired, if we are unable to negotiate acceptable terms with these third parties or if these third parties are unable to deliver products for us, whether due to a labor shortage, slow down or stoppage, deteriorating financial or business conditions, responses to the COVID-19 pandemic, terrorist attacks or for any other reason, we would be required to use alternative carriers for the shipment of products to our customers. Changing carriers could have a negative effect on our business and operating results due to the negative impact on customer experience, including reduced visibility of order status and package tracking and delays in order processing and product delivery, and we may be unable to engage alternative carriers on a timely basis, upon terms favorable to us, or at all. See Item 1A. Risk Factors – Risk Related to Our Retail Operations – “Disruptions to our logistics capability or supply chain may have an adverse impact on our operations.”
Our international operations expose us to numerous risks.
We have international retail operations in Australia, Canada and Europe. Because release schedules for hardware and software in these markets can sometimes differ from release schedules in the United States, the timing of increases and decreases in foreign sales may differ from the timing of increases and decreases in domestic sales. We are also subject to a number of other factors that may affect our current or future international operations. These include:
•economic downturns, specifically in the regions in which we operate;
•currency exchange rate fluctuations and sovereign debt crises;
•international incidents, including public health crises such as the COVID-19 pandemic;
•natural disasters;
•government instability; and
•competitors entering our current and potential markets.
Our operations in Europe are also subject to risks associated with the withdrawal of the United Kingdom from the European Union (“EU”). On January 31, 2020, the United Kingdom of Great Britain and Northern Ireland officially exited the EU (“Brexit”) and entered into a transition period to negotiate the final terms of Brexit. The transition period ended on December 31, 2020. The continued uncertainty regarding the impact of the withdrawal and any resulting increases in tariffs, importation restrictions, out of stocks, volatility in currency exchange rates, including the valuation of the euro and the British pound in particular, changes in the laws and regulations applied in the United Kingdom or impacts on economic and market conditions in the United Kingdom, the EU and its member states and elsewhere may have an adverse impact on consumer demand for our products, unfavorably impact our results of operations and financial condition.
Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act and other anti-bribery laws applicable to our operations. While we have policies and procedures to ensure compliance with these laws, our associates, contractors, representatives and agents may take actions that violate our policies. Any violations of these laws by any of these persons could have a negative impact on our business.
An adverse trend in sales during the holiday selling season could impact our financial results.
Our business, like that of many retailers, is seasonal, with a major portion of our sales and operating profit realized during the fourth fiscal quarter, which includes the holiday selling season. During fiscal 2020 and 2019, we generated approximately 42% and 34%, respectively, of our sales during the fourth quarter. Any adverse trend in sales during the holiday selling season (for example, because of the continuing and unknown duration and impact of the COVID-19 pandemic and/or related supply chain and other economic effects) could lower our results of operations for the fourth quarter and the entire fiscal year and adversely impact our liquidity.
Sales of video games containing graphic violence may decrease as a result of actual violent events or other reasons, and our financial results may be adversely affected as a result.
Many popular video games contain material with graphic violence. These games receive an “M” or “T” rating from the Entertainment Software Ratings Board. As actual violent events occur and are publicized, or for other reasons, public acceptance of graphic violence in video games may decline. Consumer advocacy groups may increase their efforts to oppose sales of graphically-violent video games and may seek legislation prohibiting their sales. As a result, our sales of those games may decrease, which could negatively impact our results of operations.
Risks Related to Our Retail Operations
An important element of our business strategy is to improve the efficiency of our global store base. Failure to successfully transfer customers and sales from closed stores to nearby stores or our e-commerce channels could adversely impact our financial results.
As a part of our ongoing business operations, we continually review our store portfolio to ensure the optimal location and number of stores. As a result of this assessment, we close stores that are not meeting performance standards or stores at the end of their lease terms with the intent of transferring sales to other nearby locations or online. We believe that we can ultimately increase profitability by successfully transferring customers and sales to other stores or online by marketing directly to loyalty members who have shopped in the stores as well as other customers who have recently visited the location that we plan to close. If we are unsuccessful in marketing to customers of the stores that we plan to close or in transferring sales to nearby stores or online, our results of operations could be negatively impacted.
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If we are unable to renew or enter into new leases on favorable terms, our revenue may be adversely affected.
All of our retail stores are located in leased premises. If the cost of leasing existing stores increases, we cannot assure that we will be able to maintain our existing store locations as leases expire. In addition, we may not be able to enter into new leases on favorable terms or at all, or we may not be able to locate suitable alternative sites in a timely manner. Our revenues and earnings may decline if we fail to maintain existing store locations, enter into new leases, or locate alternative sites.
If we are unable to successfully maintain strong retail and e-commerce experiences for our customers, our sales and results of operations could adversely be impacted.
Our business has become increasingly dependent on multiple sales channels as we strive to deliver a seamless shopping experience to our customers through both online and in-store shopping experiences. Operating an e-commerce platform is a complex undertaking and exposes us to risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand, and develop our internet operations, website, mobile applications and software and other related operational systems. Continuing to improve our e-commerce platform involves substantial investment of capital and resources, increasing supply chain and distribution capabilities, attracting, developing and retaining qualified personnel with relevant subject matter expertise and effectively managing and improving the customer experience. In-store and e-commerce retail are competitive and evolving environments. Insufficient, untimely or inadequately prioritized or ineffectively implemented investments could significantly impact our profitability and growth and affect our ability to attract new customers, as well as maintain our existing ones.
Enhancing the customer experience through new and evolved programs, such as buy-online-pickup-in-store, new or expanded delivery options, the ability to shop through a mobile application or other similar programs, depends in part on the effectiveness of our inventory management processes and systems, the effectiveness of our merchandising strategy and mix, our supply chain and distribution capabilities, and the timing and effectiveness of our marketing activities, particularly our promotions. Costs associated with implementing store and/or e-commerce initiatives may be higher than expected, and the initiatives may not result in increased sales, including same store sales, customer traffic, customer loyalty or other anticipated results. Website downtime and other technology disruptions in our e-commerce platform, including due to cyber-related issues or natural disasters, and supply and distribution delays and other related issues may affect the successful operation of our e-commerce platform. If we are not able to successfully operate or improve our e-commerce platform and core business, we may not be able to provide a relevant shopping experience or improve customer traffic, sales or margins, and our reputation, operations, financial condition, results of operations and cash flows could be materially adversely affected.
Our strategic plans and transformation initiatives may initially result in a negative impact on our financial results and such plans and initiatives may not achieve the desired results within the anticipated time frame or at all.
Our ability to successfully implement and execute our strategic plans and transformation initiatives is dependent on many factors, some of which are out of our control. Our strategic plans and transformation initiatives may require significant capital investment and management attention at the expense of other business initiatives and may take longer than anticipated to achieve the desired return. Additionally, any new initiative is subject to certain risks, including customer acceptance, competition and the ability to attract and retain qualified personnel to support the initiative.
We may face enhanced risks as new business initiatives lead us to engage in new activities.
We are pursuing, and expect to continue to pursue, business and strategic initiatives, some of which may expose us to new or enhanced risks. For example, we are exploring opportunities in blockchain, NFT, and Web 3.0 technology. Legal, regulatory and reputational risks may exist in connection with activities and transactions involving new technology where there is regulatory uncertainty or where there are different or conflicting regulations.
Engaging in new initiatives exposes us to a variety of risks, including that we may be unable to successfully develop new, competitive, efficient and effective products, systems and processes, and hire and retain the necessary personnel to support these activities. If and to the extent we are unable to successfully execute these initiatives, we may incur unanticipated costs and losses, and face other adverse consequences, such as negative reputational effects. In addition, the actual effects of pursuing these initiatives may differ, possibly materially, from the benefits that we expect to realize from them, such as the generation of additional revenues.
Pressure from our competitors may force us to reduce our prices or increase spending, which may result in losses incurred in the future.
The retail environment is intensely competitive and subject to rapid changes in consumer preferences and frequent new product introductions. We compete with mass merchants and regional chains, including Wal-Mart and Target; computer product and consumer electronics stores, including Best Buy; internet-based retailers such as Amazon.com; other U.S. and international video game and PC software specialty stores located in malls and other locations, such as Carrefour and Media Markt; toy retail chains; direct sales by software publishers; the online environments operated by Sony (PlayStation Network), Microsoft (XBox Live), Nintendo (Nintendo Switch Online), as well as other online retailers and game rental companies. We expect competition in e-commerce generally to continue to increase. Some of our competitors have longer operating histories and may have greater financial resources than we do or other advantages. In addition, certain of these competitors may have more experience and infrastructure to support increased delivery orders, and may have improved their ability to deliver products as a result of, including in the case of mall merchants and regional chains, having been permitted to remain open during the COVID-19 pandemic. Additionally, competitors who were able to remain open during the COVID-19 pandemic may create increased competition for allocations from our suppliers. Furthermore, video game products and content are increasingly being digitally distributed and new competitors built to take advantage of these new capabilities are entering the marketplace, and other methods may emerge in the future. The potential increase in consumers’ downloading of video game content in favor of
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purchasing games in stores as a result of COVID-19 related quarantine policies and social distancing measures could further accelerate consumer purchases of online video game content from other retailers. We also compete with other sellers of pre-owned video game products and other PC software distribution companies, including Steam. Certain of our mass-merchant competitors are expanding in the market for new and pre-owned video games through aggressive pricing which may negatively affect our margins, sales and earnings for these products. Additionally, we compete with other forms of entertainment activities, including browser, social and mobile games, movies, television, theater, sporting events and family entertainment centers. If we lose customers to our competitors, or if we reduce our prices or increase our spending to maintain our customers, such actions may result in an increase in losses.
If our management information systems fail to perform or are inadequate, our ability to manage our business could be disrupted.
We rely on computerized inventory and management systems to coordinate and manage the activities in our distribution centers, as well as to communicate distribution information to the off-site, third-party operated distribution centers with which we work. The third-party distribution centers pick up products from our suppliers, repackage the products for each of our stores and ship those products to our stores by package carriers. We use inventory replenishment systems to track sales and inventory.
Our ability to rapidly process incoming shipments of new release titles and deliver them to all of our stores, either that day or by the next morning, enables us to meet peak demand and replenish stores at least twice a week, to keep our stores in stock at optimum levels and to move inventory efficiently. Our systems are subject to damage or interruption from power outages, telecommunications failures, cyber-attacks, security breaches and catastrophic events. If our inventory or management information systems fail to adequately perform their functions, our business could be adversely affected. In addition, if operations in any of our distribution centers were to shut down or be disrupted or if these centers were unable to accommodate stores in a particular region, our business and results of operations may be negatively impacted.
We rely on centralized facilities for refurbishment of our pre-owned products. Any disruption to these facilities could adversely affect our profitability.
We rely on centralized facilities for the refurbishment of many of the pre-owned products that we sell. If any disruption occurred at these facilities, whether due to natural disaster or severe weather, or events such as fire, accidents, power outages, systems failures, restrictions on business operations (including as a result of the COVID-19 pandemic), or other unforeseen causes, sales of our pre-owned products could decrease. Since we generally obtain higher margins on our pre-owned products, any adverse effect on their sales could adversely affect our profitability.
Disruptions to our logistics capability or supply chain may have an adverse impact on our operations.
We depend on package carriers for the delivery of products to our customers and our stores. Any significant interruption or disruption in carrier service to our distribution centers or stores due to severe weather, natural disasters, information technology upgrades, operating issues, disruptions to our transportation network, public heath crises, pandemics, including the COVID-19 pandemic, or other unanticipated events, could impair our ability to obtain or deliver inventory in a timely manner, cause cancellations or delays in shipments to customers or otherwise disrupt our normal business operations.
Our logistics services are operated through our distribution centers. An interruption of operations at any of our distribution centers could have a material adverse effect on the operations of branches served by the affected distribution. Such disaster related risks and effects are not predictable with certainty and, although they typically can be mitigated, they cannot be eliminated. We seek to mitigate our exposures to disaster events in a number of ways. For example, where feasible, we design the configuration of our facilities to reduce the consequences of disasters. We also maintain insurance for our facilities against casualties, and we evaluate our risks and develop contingency plans for dealing with them. Although we have reviewed and analyzed a broad range of risks applicable to our business, the ones that actually affect us may not be those that we have concluded are most likely to occur. Furthermore, although our reviews have led to more systematic contingency planning, our plans are in varying stages of development and execution, such that they may not be adequate at the time of occurrence for the magnitude of any particular disaster event that we may encounter. See Item 1A. Risk Factors -- Risks Related to Our Ability to Grow Our Business – “We depend on third-party delivery services to deliver products to our retail locations, processing centers and customers on a timely and consistent basis, and deterioration in our relationship with these third-party providers or increases in the fees that they charge could reduce our margins, harm our reputation and adversely affect our business and financial condition.”
Our sales of collectibles depend on popularity of and trends in pop culture, and our ability to react to them.
Our sales of collectibles are heavily dependent upon the continued demand by our customers for collectibles, apparel, toys, gadgets, electronics and other retail products for pop culture and technology enthusiasts. The popularity of such products is often driven by movies, television shows, music, fashion and other pop culture influences. The market for, and appeal of, particular types of music, movies, television shows, artists, actors, styles, trends and brands are constantly changing. The interruption in the production of new music, movies and television shows, and the reduced access to our storefronts by consumers caused by the COVID-19 pandemic, has had, and may continue to have, a negative impact on sales of collectibles. In addition, our failure to anticipate, identify and react appropriately to changing trends and preferences of customers could lead to, among other things, excess inventories and higher markdowns. There can be no assurance that the collectibles and related products that we sell will appeal to our customers.
We depend on licensed products for a substantial portion of our sales of collectibles and our inability to maintain such licenses and obtain new licensed products would adversely affect our sales of collectibles.
We license from others the rights to sell certain of our collectibles and many of these products contain a third party’s trademarks, designs and other intellectual property. If we are unable to maintain current licenses or obtain new licensed products with
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comparable consumer demand, our sales of collectibles would decline. Furthermore, we may not be able to prevent a licensor from choosing not to renew a license with us and/or from licensing a product to one of our competitors.
If our vendors fail to provide marketing and merchandising support at historical levels, our sales and earnings could be negatively impacted.
The manufacturers of video game hardware and software have typically provided retailers with significant marketing and merchandising support for their products. As part of this support, we receive cooperative advertising and market development payments from these vendors which enable us to actively promote and merchandise the products we sell and drive sales at our stores and on our websites. We cannot assure you that vendors will continue to provide this support at historical levels. If they fail to do so, our business and results of operations may be negatively impacted.
Restrictions on our ability to purchase and sell pre-owned video game products could negatively affect our financial condition and results of operations.
Our financial results depend on our ability to purchase and sell pre-owned video game products in our stores. Actions by manufacturers or publishers of video game products or governmental authorities to prohibit or limit our ability to purchase or sell pre-owned video game products, or to limit the ability of consumers to play pre-owned video games, could have a negative impact on our results of operations.
Risks Related to Laws and Regulations
Changes to tariff and import/export regulations may negatively impact our future financial condition and results of operations.
The United States and other countries have from time to time proposed and enacted protectionist trade policies that could increase the cost or reduce the availability of certain merchandise. In particular, the previous U.S. administration has made certain changes to import/export tariffs and international trade agreements. The changes announced and made to date do not impact the merchandise that we offer. Any measures that could impact the cost or availability of the merchandise we offer could have an adverse impact on our business because a significant portion of the products we offer are purchased from foreign vendors and manufactured in foreign countries.
Unfavorable changes in our global tax rate could have a negative impact on our business, results of operations and cash flows.
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. Depending upon the sources of our income, any agreements we may have with taxing authorities in various jurisdictions and the tax filing positions we take in various jurisdictions, our overall tax rate may be higher than other companies or higher than our tax rates have been in the past. 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 business and to estimates of the amount of income to be derived in any given jurisdiction. A change in the mix of our business from year to year and from country to country, changes in rules related to accounting for income taxes, changes in tax laws in any of the multiple jurisdictions in which we operate or adverse outcomes from the tax audits that regularly are in process in any jurisdiction in which we operate could result in an unfavorable change in our overall tax rate, which could have a material adverse impact on our business and results of our operations.
We also continue to monitor developments related to tax legislation and government policy, including U.S. corporate tax reform. The impact of these potential changes to our business and consolidated financial results cannot be determined until the relevant legislation and policies are finalized.
Legislative actions and changes in accounting rules may cause our general and administrative and compliance costs to increase and impact our future financial condition and results of operations.
To comply with laws adopted by the U.S. government or other U.S. or foreign regulatory bodies, we may be required to increase our expenditures and hire additional personnel and additional outside legal, accounting and advisory services, all of which may cause our general and administrative and compliance costs to increase. Significant workforce-related legislative changes could increase our expenses and adversely affect our operations. Examples of possible workforce-related legislative changes include changes to an employer’s obligation to recognize collective bargaining units, the process by which collective bargaining agreements are negotiated or imposed, minimum wage requirements, and health care mandates. In addition, changes in the regulatory environment affecting Medicare reimbursements, workplace safety (including in response to the COVID-19 pandemic), product safety, supply chain transparency, and increased compliance costs related to enforcement of federal and state wage and hour statutes and common law related to overtime, among others, could cause our expenses to increase without an ability to pass through any increased expenses through higher prices. Environmental legislation or other regulatory changes could impose unexpected costs or impact us more directly than other companies due to our operations as a global retailer. Specifically, environmental legislation or international agreements affecting energy, carbon emissions, and water or product materials are continually being explored by governing bodies. Increasing energy and fuel costs, supply chain disruptions and other potential risks to our business, as well as any significant rule making or passage of any such legislation, could materially increase the cost to transport our goods and materially adversely affect our results of operations. Additionally, regulatory and enforcement activity focused on the retail industry has increased in recent years, increasing the risk of fines and additional operational costs associated with compliance.
As a seller of certain consumer products, we are subject to various federal, state, local and international laws, regulations, and statutes relating to product safety and consumer protection.
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While we take steps to comply with these laws, there can be no assurance that we will be in compliance, and failure to comply with these laws could result in litigation, regulatory action and penalties which could have a negative impact on our business, financial condition and results of operations. In addition, our suppliers might not adhere to product safety requirements and the Company and those suppliers may therefore be subject to involuntary or voluntary product recalls or product liability lawsuits. Direct costs, lost sales and reputational damage associated with product recalls, government enforcement actions or product liability lawsuits, individually or in the aggregate, could have a negative impact on future revenues and results of operations.
Government regulation of the Internet, e-commerce and other aspects of our business is evolving, and we may experience unfavorable changes in or failure to comply with existing or future regulations and laws.
We are subject to a number of regulations and laws that apply generally to businesses, as well as regulations and laws specifically governing the Internet and e-commerce and the marketing, sale and delivery of goods and services over the Internet.
Existing and future regulations and laws may impede the growth and availability of the Internet and online services and may limit our ability to operate our business. These laws and regulations, which continue to evolve, cover taxation, tariffs, privacy and data protection, data security, pricing, content, copyrights, distribution, mobile and other communications, advertising practices, electronic contracts, sales procedures, automatic subscription renewals, credit card processing procedures, consumer protections, the provision of online payment services, unencumbered Internet access to our services, the design and operation of websites, and the characteristics and quality of product offerings that are offered online. We cannot guarantee that we have been or will be fully compliant in every jurisdiction, as it is not entirely clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, consumer protection, libel and personal privacy apply or will be enforced with respect to the Internet and e-commerce, as many of these laws were adopted before the advent of the Internet and e-commerce and do not contemplate or address the unique issues they raise. Moreover, as e-commerce continues to evolve, increasing regulation and enforcement efforts by federal and state agencies and the prospects for private litigation claims related to our data collection, privacy policies or other e-commerce practices become more likely. In addition, the adoption of any laws or regulations, or the imposition of other legal requirements, that adversely affect our ability to market, sell, and deliver our products could decrease our ability to offer, or customer demand for, our offerings, resulting in lower net revenue, and existing or future laws or regulations could impair our ability to expand our product offerings, which could also result in lower net revenue and make us more vulnerable to increased competition. Future regulations, or changes in laws and regulations or their existing interpretations or applications, could also require us to change our business practices, raise compliance costs or other costs of doing business and materially adversely affect our business, financial condition and operating results.
Risks Related to Our Common Stock
The market price of our Class A Common Stock has been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control.
The market price of our common stock has fluctuated, and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. These factors include, without limitation:
•“short squeezes”;
•comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media;
•large stockholders exiting their position in our Class A Common Stock or an increase or decrease in the short interest in our Class A Common Stock;
•actual or anticipated fluctuations in our financial and operating results;
•risks and uncertainties associated with the ongoing COVID-19 pandemic;
•the timing and allocations of new product releases including new console launches;
•the timing of new store openings or closings;
•shifts in the timing or content of certain promotions or service offerings;
•the effect of changes in tax rates in the jurisdictions in which we operate;
•acquisition costs and the integration of companies we acquire or invest in;
•the mix of earnings in the countries in which we operate;
•the costs associated with the exit of unprofitable markets, businesses or stores;
•changes in foreign currency exchange rates;
•negative public perception of us, our competitors, or industry; and
•overall general market fluctuations.
Stock markets in general and our stock price in particular have recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies and our company. These broad market fluctuations may adversely affect the trading price of our Class A Common Stock. In particular, a large proportion of our Class A Common Stock has been and may continue to be traded by short sellers which has put and may continue to put pressure on the supply and demand for our Class A Common Stock, further influencing volatility in its market price. Additionally,
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these and other external factors have caused and may continue to cause the market price and demand for our Class A Common Stock to fluctuate substantially, which may limit or prevent our stockholders from readily selling their shares of our common stock and may otherwise negatively affect the liquidity of our Class A Common Stock.
A “short squeeze” due to a sudden increase in demand for shares of our Class A Common Stock that largely exceeds supply has led to, and may continue to lead to, extreme price volatility in shares of our Class A Common Stock.
Investors may purchase shares of our Class A Common Stock to hedge existing exposure or to speculate on the price of our Class A Common Stock. Speculation on the price of our Class A Common Stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our Class A Common Stock available for purchase on the open market, investors with short exposure may have to pay a premium to repurchase shares of our Class A Common Stock for delivery to lenders of our Class A Common Stock. Those repurchases may in turn, dramatically increase the price of shares of our Class A Common Stock until additional shares of our Class A Common Stock are available for trading or borrowing. This is often referred to as a “short squeeze.”
A large proportion of our Class A Common Stock has been and may continue to be traded by short sellers which may increase the likelihood that our Class A Common Stock will be the target of a short squeeze. A short squeeze has led and could continue to lead to volatile price movements in shares of our Class A Common Stock that are unrelated or disproportionate to our operating performance or prospects and, once investors purchase the shares of our Class A Common Stock necessary to cover their short positions, the price of our Class A Common Stock may rapidly decline. Stockholders that purchase shares of our Class A Common Stock during a short squeeze may lose a significant portion of their investment.
Information available in public media that is published by third parties, including blogs, articles, message boards and social and other media may include statements not attributable to the Company and may not be reliable or accurate.
We have received, and may continue to receive, a high degree of media coverage that is published or otherwise disseminated by third parties, including blogs, articles, message boards and social and other media. This includes coverage that is not attributable to statements made by our officers or associates. Information provided by third parties may not be reliable or accurate and could materially impact the trading price of our Class A Common Stock which could cause stockholders to lose their investments.
A large number of shares of our Class A Common Stock available for future sale could adversely affect the market price of our Class A Common Stock and may be dilutive to current stockholders.
The sales of a substantial number of shares of our Class A Common Stock, or the perception that such sales could occur, could adversely affect the price for our Class A Common Stock. Our Board of Directors may authorize the issuance of additional authorized but unissued Class A Common Stock or other authorized but unissued securities at any time, including pursuant to equity incentive plans. In addition, we have filed a registration statement with the SEC, allowing us to offer, from time to time and at any time, equity securities (including common or preferred stock), subject to market conditions and other factors. Accordingly, we may, from time to time and at any time, seek to offer and sell our equity securities, including sales of our Class A common stock pursuant to our ATM program, based upon market conditions and other factors.
Future sales of a substantial amount of our Class A Common Stock in the public markets by our insiders, or the perception that these sales may occur, may cause the market price of our Class A Common Stock to decline.
Our employees, directors and officers, and their affiliates, hold substantial amounts of shares of our Class A Common Stock. Sales of a substantial number of such shares by these stockholders, or the perception that such sales will occur, may cause the market price of our Class A Common Stock to decline. Other than restrictions on trading that arise under securities laws (or pursuant to our securities trading policy that is intended to facilitate compliance with securities laws), including the prohibition on trading in securities by or on behalf of a person who is aware of nonpublic material information, we have no restrictions on the right of our employees, directors and officers, and their affiliates, to sell their unrestricted shares of Class A Common Stock.
Risks Related to Financial Performance or General Economic Conditions
Our results of operations may fluctuate from quarter to quarter.
Our results of operations may fluctuate from quarter to quarter depending upon several factors, some of which are beyond our control. These factors include, but are not limited to:
•the timing and allocations of new product releases including new console launches;
•the timing of new store openings or permanent or temporary closings, including those related to the COVID-19 pandemic;
•the amounts devoted to strategic investments, including in multi-channel capabilities and other business initiatives, and failure to achieve anticipated profitability increases and benefits from such initiatives within the expected time-frames or at all;
•timing and extent of the achievement of anticipated profit increases from investments, if at all
•shifts in the timing or content of certain promotions or service offerings;
•the effect of changes in tax rates in the jurisdictions in which we operate;
•acquisition costs and the integration of companies we acquire or invest in;
•the mix of earnings in the countries in which we operate;
•the costs associated with the exit of unprofitable markets, businesses or stores; and
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•changes in foreign currency exchange rates.
These and other factors could affect our business, financial condition and results of operations, and this makes the prediction of our financial results on a quarterly basis difficult. Also, it is possible that our quarterly financial results may be below the expectations of public market analysts.
The agreement governing our revolving credit facility restricts our current and future operations, particularly our ability to respond to changes or to take certain actions or take advantage of certain business opportunities.
The agreement governing our revolving credit facility contains a number of restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:
•incur, assume or permit to exist additional indebtedness or guaranty certain obligations;
•declare dividends, make payments or redeem or repurchase capital stock or make distributions in respect of capital stock;
•prepay, redeem or purchase certain indebtedness;
•issue certain preferred stock or similar equity securities;
•make loans and certain investments;
•sell assets;
•incur liens;
•engage in transactions with affiliates;
•enter into agreements restricting our subsidiaries’ ability to pay dividends; and
•engage in mergers, acquisitions and other business combinations.
In addition, the restrictive covenants applicable to our revolving credit facility require us to maintain a fixed charge coverage ratio if excess availability under the revolving credit facility falls below certain thresholds. The impact of the COVID-19 pandemic on our financial performance has impaired our ability to comply with the fixed charge coverage ratio covenant, which impacts our access to the availability under the revolving credit facility.
A breach of the covenants or restrictions under the agreement governing our revolving credit facility could result in an event of default. Such an event of default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the revolving credit facility would permit the lenders under our revolving credit facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our revolving credit facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. If our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be:
•limited in how we conduct our business;
•unable to raise additional debt or equity financing necessary to operate during general economic or business downturns; or
•unable to compete effectively or to take advantage of new business opportunities.
These restrictions may affect our ability to grow in accordance with our strategy.
To fund our operations, we require cash. We may not be able to generate sufficient cash flow to meet such obligations.
Our ability to generate sufficient cash flow from operations to fund our business will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we do not generate sufficient cash flow from operations to fund our business, we may have to sell assets, reduce or delay capital investments or seek to raise additional capital. We cannot provide assurance that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales or, that additional capital could be raised.
We and our subsidiaries may be able to incur additional debt. This could further increase the risks associated with our leverage.
Although our revolving credit facility agreement contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. Additionally, these restrictions will not prevent us from incurring obligations that do not constitute indebtedness. Such future indebtedness or obligations may have restrictions similar to, or more restrictive than, those included in our revolving credit facility agreement. The incurrence of additional indebtedness could impact our financial condition and results of operations.
General Risk Factors
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Turnover in our senior management or our inability to attract and retain qualified personnel could have a material adverse impact on our business and results of operations.
Our success depends, in part, on the continuing services and contributions of our leadership team to execute on our strategic plan and to identify and pursue new opportunities. Turnover in key leadership positions in the Company could adversely affect our ability to manage the Company efficiently and effectively, could be disruptive and distracting to management and may lead to additional departures of current personnel, any of which could have a material adverse effect on our business and results of operations.
Our success also depends, in part, upon our ability to attract, motivate and retain a highly trained and engaged workforce, management for our stores and skilled merchandising, marketing, financial and administrative personnel. In addition, the turnover rate in the retail industry is relatively high, and there is an ongoing need to recruit and train new store associates. Factors that affect our ability to maintain sufficient numbers of qualified associates include associate morale, our reputation, unemployment rates, competition from other employers and our ability to offer appropriate compensation packages.
Any turnover in senior management in the future or inability to attract and retain qualified personnel could have a material adverse effect on our business and results of operations.
Recent turnover with our Board may disrupt our operations, our strategic focus or our ability to drive stockholder value.
There have been significant changes to our Board since June 2020 as previously reported in our periodic reports filed with the SEC. Turnover among our Board may disrupt our operations, our strategic focus or our ability to drive stockholder value. If we fail to attract and retain new skilled personnel for our Board, our business and growth prospects could disrupt our operations and have a material adverse effect on our operations and business.
If we do not maintain the security of our customer, associate or company information, we could damage our reputation, incur substantial additional costs and become subject to litigation.
An important part of our business involves the receipt, processing and storage of personal information of our customers and associates, including, in the case of customers, payment information. We have systems and processes in place that are designed to protect against security and data breaches and unauthorized access to confidential information. Nevertheless, cyber-security risks such as malicious software and attempts to gain unauthorized access to data are rapidly evolving and becoming increasingly sophisticated. Techniques or software used to gain unauthorized access, and/or disable, degrade or harm our systems may be difficult to detect for prolonged periods of time, and we may be unable to anticipate these techniques or put in place protective or preventive measures. These attempts to gain unauthorized access could lead to disruptions in our systems, unauthorized release of confidential or otherwise protected information or corruption of data. If individuals are successful in infiltrating, breaking into, disrupting, damaging or otherwise stealing from our computer systems or the computer system of our third-party providers, we may have to make a significant investment to fix or replace them, and may suffer interruptions in our operations in the interim, including interruptions in our ability to accept payment from customers and our ability to issue and redeem loyalty points under our Power Up Rewards program. Such an event may also expose us to costly litigation, government investigations, government enforcement actions, fines and/or lawsuits and may significantly harm our reputation with our members and customers. We are continuously working to upgrade our information technology systems and provide associate awareness training around phishing, malware, and other cyber risks to protect our member, customer, associate, and company data against cyber risks and security breaches. Despite these efforts, we have experienced cybersecurity attacks in the past and there is no guarantee that the procedures that we have implemented to protect against unauthorized access to secured data are adequate to safeguard against future data security breaches. While past cybersecurity attacks have not resulted in material losses, a data security breach or any failure by us to comply with applicable privacy and information security laws and regulations could materially impact our business and our results of operations. Moreover, a data security breach or change in applicable privacy or security laws or regulations could require us to devote significant management resources to address the problems created by the breach or such change in laws or regulations and to expend significant additional resources to upgrade further the security measures that we employ to guard against such breaches or to comply with such change in laws or regulations, which could disrupt our business, operations and financial condition.
Damage to our reputation could adversely affect our business and our ability to attract and retain customers and employees.
Our continued success depends upon customers’ perception of our Company. Any negative publicity relating to our vendors, products, practices or our Company could damage our reputation and adversely impact our ability to attract and retain customers and employees. Failure to detect, prevent, or mitigate issues that might give rise to reputational risk or failure to adequately address negative publicity or perceptions could adversely impact our reputation, business, results of operations, and financial condition.
If our internal control over financial reporting is ineffective, our business may be adversely affected and we may lose market confidence in our reported financial information which could adversely impact our business and stock price.
Effective internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of consolidated financial statements and may not prevent or detect misstatements because of inherent limitations. These limitations include, among others, the possibility of human error, inadequacy or circumvention of controls and fraud. Additionally, remote work arrangements and other operational changes instituted in response to the COVID-19 pandemic may impair our ability to maintain effective internal control over financial reporting.
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If we are unable to maintain effective internal control over financial reporting, our ability to report financial information timely and accurately could be adversely affected. As a result, we could lose investor confidence and become subject to litigation or investigations, which could adversely affect our business, operations, financial condition and our stock price.
Litigation and the outcomes of such litigation could negatively impact our future financial condition and results of operations.
In the ordinary course of itsour business, the Company is,we are, from time to time, subject to various litigation and legal proceedings, including matters involving wage and hour employeeassociate class actions, stockholder and consumer class actions.actions, tax audits and unclaimed property audits by states. The Company may enter into discussions regarding settlementoutcome of litigation and other legal proceedings and the magnitude of potential losses therefrom, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify.
Certain of these and other types of lawsuits, and may enter into settlement agreements, if it believes settlement is in the best interest of its stockholders. The Company does not believe that any such existing legal proceedings, if decided adversely to us or settlements, individuallysettled by us, may require changes to our business operations that negatively impact our operating results or in the aggregate, will haveinvolve significant liability awards that impact our financial condition. The cost to defend litigation may be significant. As a material effect on itsresult, legal proceedings may adversely affect our business, financial condition, results of operations or liquidity.
ITEM 1A.    RISK FACTORS
In light of recent developments relating to the COVID-19 pandemic, the Company amended and restated all risk factors that were included in item "1A. Risk Factors" of its 2019 Annual Report on Form 10-K filed with the SEC on March 27, 2020. The amended and restated risk factors are included in Exhibit 99.4 to the Form 8-K the Company filed with the SEC on June 5, 2020 and these risk factors were further supplemented in Item 1A of the Company's Quarterly Report on Form 10-Q filed with the SEC on September 9, 2020.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.    OTHER INFORMATION
None.On May 26, 2021, we received a request from the Staff of the SEC for the voluntary production of documents and information concerning an SEC investigation into the trading activity in our securities and the securities of other companies. On August 25, 2021, the SEC issued a subpoena calling for additional documents, as a follow up to the initial request. We are in the process of producing the documents and have been and intend to continue cooperating fully with the SEC Staff regarding this matter. This inquiry is not expected to adversely impact us.
ITEM 6.    EXHIBITS
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ITEM 6.    EXHIBITS
Exhibit
Number		DescriptionPreviously Filed as an Exhibit to and Incorporated by Reference FromDate Filed
10.1
Fourth Amendment to Second Amendment and Restated Credit Agreement, dated as of August 28, 2020,dated November 3, 2021, by and among GameStop Corp., the other Borrowers party thereto, the LendersGuarantors party thereto, the other borrowers and guarantors from time to time party thereto, the lenders and issuers from time to time party thereto, Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and Australian Security Trustee, Wells Fargo Bank, National Association, Bank of America, N.A., JPMorgan Chase Bank, N.A., Regions Bank, and Fifth Third Bank, National Association, as Co-Syndication Agents, Wells Fargo Bank, National Association, BofA Securities Inc., JPMorgan Chase Bank, N.A., Regions Bank, and Fifth Third Bank, National Association, as Joint Lead Arrangers and Joint Bookrunners.


Current Report on Form 8-K8-K/ASeptember 2, 2020
10.2
Uncommitted Letter of Credit Facility, dated as of August 28, 2020, by and among GameStop Corp., the other borrowers party thereto and Bank of America, N.A.
Current Report on Form 8-KSeptember 2, 2020November 4, 2021
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
32.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
32.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are imbeddedembedded within the inline XBRL document.Submitted electronically herewith.
101.SCHInline XBRL Taxonomy Extension SchemaSubmitted electronically herewith.
101.CALInline XBRL Taxonomy Extension Calculation LinkbaseSubmitted electronically herewith.
101.DEFInline XBRL Taxonomy Extension Definition LinkbaseSubmitted electronically herewith.
101.LABInline XBRL Taxonomy Extension Label LinkbaseSubmitted electronically herewith.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).Submitted electronically herewith.


*This exhibit is a management or compensatory contract.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GAMESTOP CORP.
By: /s/ JAMES A. BELLMichael Recupero
 James A. BellName: Michael Recupero
 Executive Vice President andTitle: Chief Financial Officer
 (Principal Financial Officer)
Date: December 8, 20202021 
GAMESTOP CORP.
By:/s/    DIANA JAJEH
Diana Jajeh
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: December 8, 2020

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