##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended January 31,
    2004                                              
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission File No. 1-31228



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GameStop Corp.

(Exact name of registrant as specified in its
Charter)


|                                                                                              |  |                                         
|--------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                      |  | 75-2951347                              
|(State or other jurisdiction of
    incorporation or organization)                            |  | (I.R.S. Employer
    Identification No.)
|                                                                                             
|2250 William D. Tate Avenue,
    Grapevine, Texas(Address of principal executive
    offices) |  | 76051(Zip Code)                         

Registrants telephone number, including
area code:

(817) 424-2000


Securities registered pursuant to
Section 12(b) of the Act:

|                                                    |  |                                       
|--------------------------------------------------- |  | --------------------------------------
|(Title of Class)                                    |  | (Name of Exchange on which registered)
|                                                    |  |                                       
|Class A Common Stock, $.001 par value per
    share |  | New York Stock Exchange               

Securities registered pursuant to
Section 12(g) of the Act:

None


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 þ          No o

Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.     þ

Indicate by check
mark whether the registrant is an accelerated filer (as defined
on Rule 12b-2 of the
Act).     Yes þ          No o

The aggregate
market value of the voting and non-voting stock held by
non-affiliates of the registrant was approximately $277,762,620
based upon the closing market price of $13.53 per share of
Class A Common Stock on the New York Stock Exchange as of
August 1, 2003.

Number of shares of
$.001 par value Class A Common Stock outstanding as of
March 15, 2004: 21,012,608

Number of shares of
$.001 par value Class B Common Stock outstanding as of
March 15, 2004: 36,009,000











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TABLE OF CONTENTS

|                                          |  |                                                                                                                      |     |      |    | 
|----------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | --- | ---- | -- | 
|                                          |  |                                                                                                                      |     | Page
|                                          |  |                                                                                                                      |     |     
|PART I                                   
|Item 1.                                   |  | Business                                                                                                             |     |      | 2  | 
|Item 2.                                   |  | Properties                                                                                                           |     |      | 18 | 
|Item 3.                                   |  | Legal Proceedings                                                                                                    |     |      | 18 | 
|Item 4.                                   |  | Submission of Matters to a
    Vote of Security Holders                                                              |     |      | 19 | 
|PART II                                  
|Item 5.                                   |  | Market for Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities |     |      | 19 | 
|Item 6.                                   |  | Selected Consolidated
    Financial Data                                                                             |     |      | 20 | 
|Item 7.                                   |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                            |     |      | 22 | 
|Item 7A.                                  |  | Quantitative and Qualitative
    Disclosures About Market Risk                                                       |     |      | 29 | 
|Item 8.                                   |  | Consolidated Financial
    Statements and Supplementary Data                                                         |     |      | 30 | 
|Item 9.                                   |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                             |     |      | 30 | 
|Item 9A.                                  |  | Controls and Procedures                                                                                              |     |      | 30 | 
|PART III                                 
|Item 10.                                  |  | Directors and Executive
    Officers of the Registrant                                                               |     |      | 30 | 
|Item 11.                                  |  | Executive Compensation                                                                                               |     |      | 30 | 
|Item 12.                                  |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters               |     |      | 30 | 
|Item 13.                                  |  | Certain Relationships and
    Related Transactions                                                                   |     |      | 30 | 
|Item 14.                                  |  | Principal Accountant Fees
    and Services                                                                           |     |      | 30 | 
|PART IV                                  
|Item 15.                                  |  | Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                                                 |     |      | 31 | 
|SIGNATURES                                |  |                                                                                                                      | 33  |     
|FINANCIAL STATEMENTS                      |  |                                                                                                                      | F-1 |     
|EXHIBITS                                  |  |                                                                                                                      |     |     
|EX-14.1: CODE OF ETHICS                  
|EX-21.1: SUBSIDIARIES                    
|EX-23.1: CONSENT OF BDO SEIDMAN, LLP     
|EX-31.1: SECTION 302 CERTIFICATION OF CEO
|EX-31.2: SECTION 302 CERTIFICATION OF CFO
|EX-32.1: SECTION 906 CERTIFICATION OF CEO
|EX-32.2: SECTION 906 CERTIFICATION OF CFO



1



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##### Table of Contents






PART I




Item 1.     Business

General

GameStop Corp. (GameStop or the
Company) is the largest video game and PC
entertainment software specialty retailer in the United States,
based on the number of U.S. stores we operate and our total U.S.
revenues. We carry one of the largest assortments of new and
used video game hardware, video game software and accessories,
PC entertainment software, and related products, including
action figures, trading cards and strategy guides. As of
January 31, 2004, we operated 1,514 stores in the United
States, Puerto Rico, Ireland and Guam. We currently operate most
of our stores under the GameStop name and are completing the
rebranding of our remaining stores to the GameStop brand. We
carry a constantly changing selection of more than 5,000 stock
keeping units (SKUs) of electronic game merchandise
in most stores. In addition, we operate a web site at
www.gamestop.com and publish Game Informer,the
industrys largest circulation multi-platform video game
magazine, with over 1,500,000 subscribers.

Of our 1,514 stores, 982 stores are located in
strip centers and 532 stores are located in shopping malls and
other locations. Our strip center stores, which average
approximately 1,500 square feet, carry a balanced mix of new and
used video game hardware, video game software and accessories,
which we refer to as video game products, and PC entertainment
software. Our mall stores, which average approximately 1,200
square feet, carry primarily new video game products and PC
entertainment software, as well as used video game products. Our
used video game products provide a unique value proposition to
our customers, and our purchasing of used video game products
provides our customers with an opportunity to trade in their
used video game products for store credits and apply those
credits towards other merchandise, which, in turn, increases
sales.

Our corporate office and distribution facilities
are housed in a 250,000 square foot headquarters and
distribution center in Grapevine, Texas. In March 2004, we
purchased a new 420,000 square foot facility in Grapevine,
Texas. We intend to relocate some of our distribution operations
to this facility in fiscal 2004 (the 52 weeks ending
January 29, 2005), and intend to relocate our headquarters
and remaining distribution center operations to this facility in
early 2005.

Prior to February 12, 2002, we were a
wholly-owned subsidiary of Barnes & Noble, Inc.
(Barnes & Noble). On February 12, 2002, we
completed an initial public offering of shares of our
Class A common stock raising net proceeds of approximately
$347.3 million. A portion of those proceeds was used to
repay $250.0 million of our $400 million indebtedness
to Barnes & Noble, with Barnes & Noble contributing the
remaining $150.0 million of indebtedness to us as
additional paid-in-capital. Of the balance of the proceeds
(approximately $97.3 million), approximately $33.8 million
was used for capital expenditures and the remainder was used for
working capital and general corporate purposes. Currently,
Barnes & Noble owns approximately 63.1% of the outstanding
shares of our capital stock through its ownership of 100% of our
Class B common stock, which represents 94.5% of the
combined voting power of all classes of our voting stock.

Disclosure Regarding Forward-looking
Statements

This report on Form 10-K and other oral and
written statements made by the Company to the public contain
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements
involve a number of risks and uncertainties. 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. These factors include, but are
not limited to:



| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | our reliance on suppliers and vendors for new
    product releases;
|
| |  | economic conditions affecting the electronic game
    industry;    

2



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| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | the competitive environment in the electronic
    game industry;                                                              
|
| |  | our ability to open and operate new stores;                                                                                   
|
| |  | our ability to attract and retain qualified
    personnel;                                                                    
|
| |  | our ability to successfully and efficiently
    transfer our headquarters and distribution center to our new
    facility; and
|
| |  | other factors described in this Form 10-K,
    including those set forth under the caption,
    Business  Risk Factors.    

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, will, should,
seeks, pro forma or similar expressions.
These 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.

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. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise after the date of
this Form 10-K. In light of these risks and uncertainties,
the forward-looking events and circumstances contained in this
Form 10-K may not occur, causing actual results to differ
materially from those anticipated or implied by our
forward-looking statements.

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,
before you make an investment decision with respect to our
Company. The risks described below are not the only ones facing
our Company. 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 Business



| |                                                    
| | ---------------------------------------------------
| | We depend upon the timely delivery of
    products.

We depend on major hardware manufacturers to
deliver new and existing video game platforms on a timely basis
and in anticipated quantities. In addition, we depend on
software publishers to introduce new and updated software
titles. Any material delay in the introduction or delivery of
hardware platforms or software titles could result in reduced
sales in one or more fiscal quarters.



| |                                                                   
| | ------------------------------------------------------------------
| | We depend upon third parties to develop
    products and software.

Our business depends upon the continued
development of new and enhanced video game platforms, PC
hardware and video game and PC entertainment software. Our
business could suffer due to the failure of manufacturers to
develop new or enhanced video game platforms, a decline in the
continued technological development and use of multimedia PCs,
or the failure of software publishers to develop popular game
and entertainment titles for current or future generation video
game systems or PC hardware.



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Our ability to obtain favorable terms from our
    suppliers may impact our financial results.

Our financial results depend significantly upon
the business terms we can obtain from our suppliers, including
competitive prices, unsold product return policies, advertising
and market development allowances,

3



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freight charges and payment terms. We purchase
substantially all of our products directly from manufacturers,
software publishers and approximately five distributors. Our
largest vendors are Nintendo of America, Inc., Electronic Arts,
Inc. and Sony Computer Entertainment of America, Inc., which
accounted for 14%, 14% and 12%, respectively, of our new product
purchases in fiscal 2003 (the 52-week period ended
January 31, 2004). If our suppliers do not provide us with
favorable business terms, we may not be able to offer products
to our customers at competitive prices.




| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | The video game system and software product
    industries are cyclical, which could cause significant
    fluctuation in our earnings.

The electronic game industry has 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. New video game
platforms have historically been introduced approximately every
five years. If video game platform manufacturers fail to develop
new hardware platforms, our sales of video game products could
decline.



| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | An adverse trend in sales during the holiday
    selling season could impact our financial results.

Our business, like that of many specialty
retailers, is seasonal, with the major portion of our sales and
operating profit realized during the fourth fiscal quarter,
which includes the holiday selling season. During fiscal 2003,
we generated approximately 40% of our sales and approximately
62% of our operating earnings during the fourth quarter. Any
adverse trend in sales during the holiday selling season could
lower our results of operations for the fourth quarter and the
entire year.



| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Our results of operations may fluctuate from
    quarter to quarter, which could result in a lower price for our
    Class A common stock.

Our results of operations may fluctuate from
quarter to quarter depending upon several factors, some of which
are beyond our control. These factors include:



| |   |                                            
| | - | -------------------------------------------
| |  | the timing of new product releases;        
|
| |  | the timing of new store openings; and      
|
| |  | shifts in the timing of certain promotions.

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 and investors.



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Our failure to effectively manage new store
    openings could lower our sales and profitability.

Our growth strategy is largely dependent upon
opening new stores and operating them profitably. We opened 300
stores in fiscal 2003 and expect to open approximately 300 to
330 new stores in fiscal 2004. Our ability to open new stores
and operate them profitably depends upon a number of factors,
some of which may be beyond our control. These factors include:



| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | the ability to identify new store locations,
    negotiate suitable leases and build out the stores in a timely
    and cost efficient manner;
|
| |  | the ability to hire and train skilled associates;                                                                                             
|
| |  | the ability to integrate new stores into our
    existing operations; and                                                                     
|
| |  | the ability to increase sales at new store
    locations.                                                                                     

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Our growth will also depend on our ability to
process increased merchandise volume resulting from new store
openings through our inventory management systems and
distribution facility in a timely manner. If we fail to manage
new store openings in a timely and cost efficient manner, our
growth may decrease.



| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | 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 center in Grapevine, Texas, 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 an
inventory replenishment system 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. If
our inventory or management information systems fail to
adequately perform these functions, our business could be
adversely affected.



| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our failure to successfully and efficiently
    transfer our headquarters and distribution center to our new
    facility could lower our sales and profitability.

In March 2004, we purchased a new 420,000 square
foot headquarters and distribution center in Grapevine, Texas.
We intend to transfer our headquarters and distribution center
operations to this facility by early 2005. If these transfers
are not implemented efficiently, our sales and profitability may
be adversely affected.



| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Pressure from our competitors may force us to
    reduce our prices or increase spending, which could decrease our
    profitability.

The electronic game industry 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 Stores, Inc.,
Target Corporation and Kmart Corporation; other video game and
PC software specialty stores located in malls and other
locations, including Electronics Boutique Holdings Corp.; toy
retail chains, including Toys R Us, Inc. and KB
Holdings, L.L.C. (KB Toys); mail-order businesses;
catalogs; direct sales by software publishers; online retailers;
and computer product and consumer electronics stores, including
Best Buy Co., Inc. and Circuit City Stores, Inc. In addition,
video games are available for rental from many video stores,
some of whom, like Hollywood Entertainment Corp. and
Blockbuster, Inc., have increased the availability of video game
products for sale. Video game products may also be distributed
through other methods which may emerge in the future. We also
compete with sellers of used video game products. Some of our
competitors in the electronic game industry have longer
operating histories and may have greater financial resources
than we do. Additionally, we compete with other forms of
entertainment activities, including 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, we may be less
profitable.



| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | 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 significant portion of the products we
purchase from them. As a result, any event causing a disruption
of imports, including the imposition of import restrictions or
trade restrictions in the form of tariffs or quotas, could
increase the cost and reduce the supply of products available to
us, which could lower our sales and profitability.



| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | If we are unable to renew or enter into new
    leases on favorable terms, our revenue growth may
    decline.

All of our retail stores are located in leased
premises. If the cost of leasing existing stores increases, we
cannot assure you that we will be able to maintain our existing
store locations as leases expire. In addition, we

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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 or additional sites for new store
expansion in a timely manner. Our revenues and earnings may
decline if we fail to maintain existing store locations, enter
into new leases, locate alternative sites or find additional
sites for new store expansion.




| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | The ability to download video games and play
    video games on the Internet could lower our sales.

While it is currently not possible to download
video game software onto existing video game platforms over the
Internet, at some point in the future this technology may become
available. A limited selection of PC entertainment software may
currently be purchased for download over the Internet, and as
technology advances, a broader selection of PC entertainment
software may become available for purchase and download or
playing on the Internet. If advances in technology continue to
expand our customers ability to access software through
these and other sources, our customers may no longer choose to
purchase video games or PC entertainment software in our stores.
As a result, our sales and earnings could decline.



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | If we fail to keep pace with changing industry
    technology, 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 and
product obsolescence. These characteristics require us to
respond quickly to technological changes and to understand their
impact on our customers preferences. If we fail to keep
pace with these changes, our business may suffer.



| |                                                                                 
| | --------------------------------------------------------------------------------
| | The terms of our credit facility could
    restrict our operational flexibility.

We are subject to operational and financial
covenants and other restrictions under our revolving credit
facility. The covenants place restrictions on our ability to,
among other things, incur more debt or create liens on our
assets, merge or consolidate with others, make acquisitions and
investments, dispose of assets, pay dividends and enter into
transactions with affiliates. These covenants could limit our
operational flexibility and restrict our ability to borrow
additional funds, if necessary, to finance operations. In
addition, our credit facility includes a number of covenants
relating to financial ratios.

Failure to comply with these operational and
financial covenants could result in an event of default under
the terms of the credit facility which, if not cured or waived,
could result in the borrowed amounts becoming due and payable.
In addition, our obligations under the credit facility are
secured by all assets owned by us and our subsidiaries. An event
of default under the credit facility would permit the lenders to
proceed directly against those assets.



| |                                                                             
| | ----------------------------------------------------------------------------
| | We depend upon our key personnel and they
    would be difficult to replace.

Our success depends upon our ability to attract,
motivate and retain key management for our stores and skilled
merchandising, marketing and administrative personnel at our
headquarters. We depend upon the continued services of our key
executive officers, R. Richard Fontaine, our Chairman of the
Board and Chief Executive Officer, Daniel A. DeMatteo, our
President and Chief Operating Officer and David W. Carlson, our
Executive Vice President and Chief Financial Officer. We do not
have employment contracts with any of our key personnel. The
loss of services of any of our key personnel could have a
negative impact on our business.



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We may engage in acquisitions which could
    negatively impact our business if we fail to successfully
    complete and integrate them.

To enhance our efforts to grow and compete, we
may engage in acquisitions. Our plans to pursue future
acquisitions are subject to our ability to negotiate favorable
terms for these acquisitions. Accordingly, we cannot assure you
that future acquisitions will be completed. In addition, to
facilitate future acquisitions, we may take actions that could
dilute the equity interests of our stockholders, increase our
debt or cause us to assume contingent liabilities, all of which
may have a detrimental effect on the price of our common stock.
Finally, if any acquisitions are not successfully integrated
with our business, our ongoing operations could be adversely
affected.

6



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| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Legislative actions, higher director and
    officer insurance costs and potential new accounting
    pronouncements are likely to cause our general and
    administrative expenses to increase and impact our future
    financial condition and results of operations.

In order to comply with the Sarbanes-Oxley Act of
2002, as well as changes to the New York Stock Exchange
listing standards and rules adopted by the Securities and
Exchange Commission (the SEC), we may be required to
increase our internal controls, hire additional personnel and
additional outside legal, accounting and advisory services, all
of which may cause our general and administrative costs to
increase. Insurers are also likely to increase premiums as a
result of the high claims rates they have incurred over the past
year from other companies, and so our premiums for our
directors and officers insurance policies are likely
to increase. Changes in the accounting rules, including
legislative and other proposals to account for employee stock
options as a compensation expense among others, could materially
increase the expenses that we report under generally accepted
accounting principles and adversely affect our operating results.

Risks Related
to our Relationship with Barnes & Noble



| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Barnes & Nobles control of our
    company could increase the difficulty of our acquisition by
    another company, even if such acquisition would be
    beneficial.

Barnes & Noble owns 100% of our outstanding
Class B common stock, which represents 94.5% of the
combined voting power of all classes of our voting stock. In
addition, some of the members of our board of directors also
serve as directors of Barnes & Noble. As a result, Barnes
& Noble has control over us, the election of our board of
directors and our management and policies. Barnes & Noble
also has control over all matters requiring stockholder
approval, including the amendment of certain provisions of our
Amended and Restated Certificate of Incorporation and Bylaws and
the approval of fundamental corporate transactions, including
mergers. In light of this control, other companies could be
discouraged from initiating a potential merger, takeover or any
other transaction resulting in a change of control. Such a
transaction potentially could be beneficial to our business or
to our stockholders. This may in turn reduce the price that
investors are willing to pay in the future for shares of our
Class A common stock.



| |                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Barnes & Noble distributes our shares
    of Class B common stock in a tax-free distribution, the
    Class A common stock may trade at a lower price than the
    Class B common stock.

If Barnes & Noble distributes our
Class B common stock to its stockholders in a tax-free
distribution, we will have two separate classes of publicly
traded common stock. Following a tax-free distribution of the
Class B common stock, the Class B common stockholders
will continue to exercise voting control over us. Barnes &
Noble may qualify for a tax-free distribution of our
Class B common stock as early as October 2004. This could
result in less liquidity for either class of our common stock
than if there were only one class of common stock and could
result in the market price of our Class A common stock
being lower than the market price of our Class B common
stock.



| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | Any conflict of interest between us and Barnes
    & Noble could hurt our business or prospects.

There is a possibility that conflicts of interest
will arise between Barnes & Noble and us in various areas
pertaining to our past and ongoing relationships. Potential
factors that may create a conflict of interest between Barnes
& Noble and us are:



| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | some of the members of our board of directors
    also sit on Barnes & Nobles board of directors, which
    could result in Barnes & Nobles interests being
    prioritized over our interests; and                                        
|
| |  | some of the members of our board of directors
    currently have, or may have in the future, an equity interest in
    Barnes & Noble, which could affect their decisions in
    resolving potential conflicts between us and Barnes & Noble.

In addition, Leonard Riggio, one of our
directors, is the Chairman of the Board and a principal
stockholder of Barnes & Noble. As of March 1, 2004, Mr.
Riggio beneficially owned approximately 20.3% of the outstanding
common stock of Barnes & Noble. Mr. Riggio also
currently has options to acquire

7



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approximately 7.3% of our outstanding common
stock. As a result, Mr. Riggio may have substantial control
over the management and affairs of our company.


Barnes & Noble is under no obligation to
resolve any potential conflicts between it and us in a manner
that is favorable to us, and we cannot guarantee that the
resolution of such conflicts would not adversely impact our
business or prospects.



| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The limited voting rights of our Class A
    common stock could impact its attractiveness to investors and
    its liquidity and, as a result, its market value.

The holders of our Class A and Class B
common stock generally have identical rights, except that
holders of our Class A common stock are entitled to one
vote per share and holders of our Class B common stock are
entitled to ten votes per share on all matters to be voted on by
stockholders. The difference in the voting rights of the
Class A and Class B common stock could diminish the
value of the Class A common stock to the extent that
investors or any potential future purchasers of our Class A
common stock ascribe value to the superior voting rights of the
Class B common stock.



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to issue common stock may be
    hampered because of our relationship with Barnes & Noble,
    which may interfere with our ability to grow our
    business.

Barnes & Noble may wish to maintain until
October 2004 or thereafter its current ownership of our
Class B common stock in order to qualify for a tax-free
distribution of such stock to its stockholders. Barnes &
Noble owns 100% of the outstanding Class B common stock,
which represents 94.5% of the combined voting power of all
classes of our voting stock. It may be difficult for us to issue
common stock in the future because of Barnes & Nobles
control of us. In addition, we have entered into a separation
agreement with Barnes & Noble that restricts our ability to
issue equity securities or securities convertible into equity
securities if the effect of the issuance would be to preclude a
tax-free distribution by Barnes & Noble to its stockholders
or our consolidation with Barnes & Noble for its financial
reporting purposes. If we are unable to issue common stock, we
may be unable to raise additional capital, which we may need to
fund our business.



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Certain affiliate agreements we have with
    Barnes & Noble could prevent us from, or increase our cost
    in, taking certain actions.

We have entered into various agreements with
Barnes & Noble, including a separation agreement, an
insurance agreement, an operating agreement, a tax
disaffiliation agreement and a registration rights agreement.
Because of our current status as a majority-owned subsidiary of
Barnes & Noble, these agreements, or some of our future
intercompany agreements with Barnes & Noble, may not be the
result of arms length negotiations. For example, these
agreements may contain terms and conditions that are less
favorable to us than we could have obtained from independent
third parties, and may prevent change of control attempts that
are beneficial to our stockholders and restrict our ability to
take certain business actions, such as selling our assets or
business or issuing additional shares of our common stock.



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | A change of control of GameStop may result if
    Barnes & Noble defaults on its credit facility.

Barnes & Noble has pledged to its lenders its
ownership interest in the entity that owns our shares of common
stock as collateral for its credit facility. If Barnes &
Noble defaults on its credit facility, our common stock owned by
Barnes & Noble could be transferred to its lenders or sold
to third parties. There can be no assurance that any new owner
will have the qualifications or ability to successfully operate
our business.

Industry Background

According to NPD Group, Inc., a market research
firm, the electronic game industry was an approximately
$11.0 billion market in the United States in 2003. Of this
$11.0 billion market, approximately $10.0 billion was
attributable to video game products, excluding sales of used
video game products, and approximately $1.0 billion was
attributable to PC entertainment software.

8



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##### Table of Contents



New Video Game Products.The Interactive Digital Software
Association, or IDSA, estimates that 50% of all Americans, or
approximately 145 million people, play video or computer
games on a regular basis. We expect the following trends to
result in increased sales of video game products:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Hardware Platform Technology Evolution.Video game hardware has evolved
    significantly from the early products launched in the 1980s. The
    processing speed of video game hardware has increased from 8-bit
    speeds in the 1980s to 128-bit speeds in next-generation systems
    such as Sony PlayStation 2, launched in 2000, and Nintendo
    GameCube and Microsoft Xbox, which both launched in November
    2001. In addition, portable handheld video game devices have
    evolved from the 8-bit Nintendo Game Boy to the 32-bit Game Boy
    Advance SP, which was introduced in March 2003. Technological
    developments in both chip processing speed and data storage have
    provided significant improvements in advanced graphics and audio
    quality, which allow software developers to create more advanced
    games, encourage existing players to upgrade their hardware
    platforms and attract new video game players to purchase an
    initial system. As general computer technology advances, we
    expect video game technology to make similar advances.
|
| |  | Next-Generation Systems Provide Multiple
    Capabilities Beyond Gaming.Many
    next-generation hardware platforms, including Sony PlayStation 2
    and Microsoft Xbox, utilize a DVD software format and have the
    potential to serve as multi-purpose entertainment centers by
    doubling as a player for DVD movies and compact discs. In
    addition, in 2002, both Sony PlayStation 2 and Microsoft Xbox
    introduced accessories which provide internet connectivity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Backward Compatibility.Sony PlayStation 2 and Nintendo Game
    Boy Advance SP are both backward compatible, meaning that titles
    produced for the earlier version of the hardware platform may be
    used on the new hardware platform. We believe that backward
    compatibility may result in more stable industry growth because
    the decrease in consumer demand for products associated with
    existing hardware platforms that typically precedes the release
    of next-generation hardware platforms may be diminished.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Introduction of Next-Generation Hardware
    Platforms Drives Software Demand.Sales of video game software generally
    increase as next-generation platforms mature and gain wider
    acceptance. Historically, when a new platform is released, a
    limited number of compatible game titles are immediately
    available, but the selection grows rapidly as manufacturers and
    third-party publishers develop and release game titles for that
    new platform. For example, when Sony PlayStation 2 was released
    in October 2000, approximately 30 game titles were available for
    sale. By January 2003, over 450 game titles for the Sony
    PlayStation 2 platform were available for sale. Currently, there
    are over 700 game titles for the Sony PlayStation 2 platform
    available for sale.                                                                                                                                                                                                                                                                        
|
| |  | Broadening Demographic Appeal.While the typical electronic game
    enthusiast is male between the ages of 14 and 34, the electronic
    game industry is broadening its appeal. More females are playing
    electronic video games, in part due to the development of video
    game products that appeal to them. According to IDSA,
    approximately 43% of all electronic game players are female.
    More adults are also playing video games as a portion of the
    population that played video games in their childhood continues
    to play and advance to the next-generation video game products.
    In addition, the availability of used video game products for
    sale has enabled a lower-economic demographic, that may not have
    been able to afford the considerably more expensive new video
    game products, to participate in the video game industry.                                                                                                                                                                                                              

Used Video Game Market.As the installed base of video game
hardware platforms has increased and new hardware platforms are
introduced, a growing used video game market has evolved in the
United States. Based on reports published by NPD, we believe
that, as of December 2003, the installed base of video game
hardware systems in the United States, based on original sales,
totaled over 165 million units, including approximately
22 million Sony PlayStation 2 units, 8 million
Microsoft Xbox units, 7 million Nintendo GameCube units, 20
million Nintendo Game Boy Advance and Game Boy Advance SP units,
28 million Sony PlayStation units and over 80 million
units of older hardware platforms such as Sega Dreamcast,
Nintendo 64, Nintendo Game Boy and Game Boy Color, Sega Genesis
and Super Nintendo systems. Hardware

9



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##### Table of Contents



manufacturers and third-party software publishers
have produced a wide variety of software titles for each of
these hardware platforms. Based on internal company estimates,
we believe that the installed base of video game software units
in the United States exceeds 625 million units.


PC Entertainment Software.PC entertainment software is generally
sold in the form of CD-ROMs and played on multimedia PCs
featuring fast processors, expanded memories, and enhanced
graphics and audio capabilities.

Business Strategy

Our goal is to enhance our position as the
nations largest specialty retailer of new and used video
game products and PC entertainment software by focusing on the
following strategies:

Targeting a Broad Audience of Game Players.We have created a store environment
targeting a broad audience including the electronic game
enthusiast, the casual gamer and the seasonal gift giver. Our
mall stores primarily focus on the electronic game enthusiast
who demands the latest merchandise featuring the
hottest technology immediately on the day of
release. Our strip center stores also serve the electronic game
enthusiast, but focus on serving the value-oriented customer by
offering a wide selection of value-priced used video game
products and the opportunity to trade in used video game
products in exchange for store credits applicable to future
purchases, which, in turn, drives more sales.

Enhancing our Image as a Destination Location.Our stores serve as destination
locations for game players due to our broad selection of
products, knowledgeable sales associates, game-oriented
environment and unique pricing proposition. We offer all major
video game platforms, provide a broad assortment of video game
products and offer a larger and more current selection of
merchandise than other retailers. We provide a high level of
customer service by hiring game enthusiasts and providing them
with ongoing sales training, as well as training in the latest
technical and functional elements of our products and services.
Our stores are equipped with several video game sampling areas,
which provide our customers the opportunity to play games before
purchase, as well as equipment to play video game clips.

Offering the Largest Selection of Used Video
Game Products.We are the
nations leading provider and carry the broadest selection
of used video game products for both current and previous
generation platforms. We are one of the only retailers that
provide video game software for previous generation platforms,
giving us a unique advantage in the video game retail industry.
The opportunity to trade in and purchase used video game
products offers our customers a unique value proposition
unavailable at mass merchants, toy stores and consumer
electronics retailers. We obtain most of our used video game
products from trade-ins made in our stores by our customers.
Used video game products generate significantly higher gross
margins than new video game products.

Building the GameStop Brand.We currently operate most of our
stores under the GameStop name and are completing the rebranding
of our remaining stores to the GameStop brand. Building the
GameStop brand has enabled us to leverage brand awareness and to
capture advertising and marketing efficiencies. Our branding
strategy is further supported by the GameStop loyalty card and
our web site. The GameStop loyalty card, which is obtained as a
bonus with a paid subscription to our Game Informermagazine, offers customers discounts on selected merchandise
in our stores. Our web site allows our customers to buy games
on-line and to learn about the latest video game products and PC
entertainment software and their availability in our stores.

Providing a First-to-Market Distribution
Network.We employ a variety of
rapid-response distribution methods in our efforts to be the
first-to-market for new video game products and PC entertainment
software. We strive to deliver popular new releases to selected
stores within hours of release and to all of our stores by the
next morning. This highly efficient distribution network is
essential, as a significant portion of a new titles sales
will be generated in the first few days and weeks following its
release. As the largest specialty retailer of video game
products and PC entertainment software in the United States,
with a proven capability to distribute new releases to our
customers quickly, we believe that we regularly receive a
disproportionately large allocation of popular new video game
products and PC entertainment software. On a daily basis, we
actively

10



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monitor sales trends, customer reservations and
store manager feedback to ensure a high in-stock position for
each store. To assure our customers immediate access to new
releases, we offer our customers the opportunity to pre-order
products in our stores or through our web site prior to their
release.


Investing in our Information Systems and
Distribution Capabilities.We employ
sophisticated and fully-integrated inventory management,
store-level point of sale and financial systems and a
centralized state-of-the-art distribution facility. These
systems enable us to maximize the efficiency of the flow of over
5,000 SKUs, improve store efficiency, optimize store in-stock
positions and carry a broad selection of inventory. Our
proprietary inventory management system enables us to maximize
sales of new release titles and avoid markdowns as titles mature
and utilizes electronic point-of-sale equipment that provides
corporate headquarters with daily information regarding
store-level sales and available inventory levels to
automatically generate replenishment shipments to each store at
least twice a week. In addition, our highly-customized inventory
management system allows us to actively manage the pricing and
product availability of our used video game products across our
store base and to reallocate our inventory as necessary. Our
systems enable each store to carry a merchandise assortment
uniquely tailored to its own sales mix and customer needs. Our
ability to react quickly to consumer purchasing trends has
resulted in a target mix of inventory, reduced shipping and
handling costs for overstocks and reduced our need to discount
products.

Growth Strategy

New Store Expansion.We intend to continue to open new
strip center stores in our targeted markets and new mall stores
in selected mall locations. We opened 210 new stores in fiscal
2002 and 300 new stores in fiscal 2003. We plan on opening
approximately 300 to 330 new stores in fiscal 2004. Our primary
growth vehicle will be the expansion of our strip center store
base, which we believe could grow to over 2,000 stores in the
United States. Our strategy is to open clusters of strip center
stores in targeted major metropolitan markets. For example, we
opened 38 new stores in the Dallas/ Fort Worth metropolitan area
in the last three years and now operate a total of 67 stores in
the Dallas/ Fort Worth area. We analyze each market relative to
target population and other demographic indices, real estate
availability, competitive factors and past operating history, if
available. In some cases, these new stores may adversely impact
sales at existing stores.

Increase Comparable Store Sales.We plan to increase our comparable
store sales by capitalizing on the growth in the video game
industry, expanding our sales of used video game products and
increasing awareness of the GameStop name.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Capitalize on Growth in Demand.Our sales of video game software grew
    by approximately 41% in fiscal 2002 and by an additional 26% in
    fiscal 2003. In fiscal 2002 and fiscal 2003, our comparable
    store sales increased 11.4% and 0.8%, respectively, driven in
    large measure by the success of Sony PlayStation 2, which was
    launched in October 2000, Microsoft Xbox and Nintendo GameCube,
    which were both launched in November 2001 and Nintendo Game Boy
    Advance SP, which was launched in March 2003. Comparable store
    sales increased a modest 0.8% in fiscal 2003, as declining video
    game hardware price points offset a significant increase in
    video game software sales. During fiscal 2002 and fiscal 2003,
    we successfully capitalized on the growth in demand for video
    game software and accessories that followed the increases in the
    installed hardware base of these four video game platforms. Over
    the next few years, we expect to continue to capitalize on the
    increasing installed base for these platforms and the related
    growth in video game software and accessories sales.
|
| |  | Increase Sales of Used Video Game Products.We will continue to expand the
    selection and availability of used video game products in both
    our mall and strip center stores. Our strategy consists of
    increasing consumer awareness of the benefits of trading in and
    buying used video game products at our stores through increased
    marketing activities. We expect the continued growth of new
    platform technology to drive trade-ins of previous generation
    products, including Nintendo Game Boy Color, Nintendo 64 and
    Sony PlayStation, as well as next generation platforms, thereby
    expanding the supply of used video game products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Increase GameStop Brand Awareness.We intend to increase customer
    awareness of the benefits of shopping in our stores. In
    connection with our brand-building efforts, in fiscal 2003, we
    increased the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |  |                                                                                                                                                                                                                                                                                                               
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | amount of media advertising in targeted markets.
    In fiscal 2004, we plan to continue to increase media
    advertising, to expand our GameStop loyalty card program, to
    aggressively promote trade-ins of used video game products in
    our stores and to leverage our web site at www.gamestop.com.

Merchandise

Our product offerings consist of new and used
video game products, PC entertainment software, and related
products, such as action figures, trading cards and strategy
guides. We also market selected PC productivity and educational
software titles. Our in-store inventory generally consists of a
constantly changing selection of over 5,000 SKUs. We have a
central buying group that negotiates terms, discounts and
cooperative advertising allowances for all of our stores. We use
customer requests and feedback, advance orders, industry
magazines and product reviews to determine which new releases
are expected to be hits. Call lists and advance orders are
tracked at individual stores to distribute titles and capture
demand effectively. This merchandise management is essential
because a significant portion of a games sales are usually
generated in the first days and weeks following its release. We
also carefully manage product pricing utilizing a tiered-pricing
strategy that enables us to tailor pricing at our stores based
on each stores competitive environment.

Video Game Software.We purchase new video game software
directly from the leading manufacturers, including Sony,
Microsoft and Nintendo, as well as over 50 third-party game
publishers, such as Electronic Arts, THQ Inc. and Activision,
Inc. We are one of the largest customers in the United States of
video game titles sold by these publishers. We carry over 1,000
SKUs of new video game software at any given time across a
variety of genres, including Sports, Action, Strategy,
Adventure/ Role Playing and Simulation.

Used Video Game Products.We are the largest retailer of used
video games in the United States. We provide our customers with
an opportunity to trade in their used video game products in our
stores in exchange for store credits which can be applied
towards the purchase of other products, including new
merchandise. We have the largest selection (over 3,000 SKUs) of
used video game titles which have an average price of $16 as
compared to $36 for new video game titles and which generate
significantly higher gross margins than new video game products.
Our trade-in program provides our customers with a unique value
proposition which is unavailable at mass merchants, toy stores
and consumer electronics retailers. This program provides us
with an inventory of used video game products which we resell to
our more value-oriented customers. In addition, our
highly-customized inventory management system allows us to
actively manage the pricing and product availability of our used
video game products across our store base and to reallocate our
inventory as necessary. Our trade-in program also allows us to
be one of the only suppliers of previous generation platforms
and related video games. We also operate a refurbishment center
where defective video game products can be tested, repaired,
relabeled, repackaged and redistributed back to our stores.

Video Game Hardware.We offer the video game platforms of
all major manufacturers, including Sony PlayStation 2 and
PlayStation, Microsoft Xbox, Nintendo GameCube, Game Boy Advance
and Game Boy Advance SP and Nokia NGage. We also offer extended
service agreements on video game hardware. In support of our
strategy to be the destination location for electronic game
players, we aggressively promote the sale of video game
platforms. Video game hardware sales are generally driven by the
introduction of new platform technology and the reduction in
price points as platforms mature. Due to our strong
relationships with the manufacturers of these platforms, we
often receive disproportionately large allocations of new
release hardware products, which is an important component of
our strategy to be the destination of choice for electronic game
players. We believe that selling video game hardware increases
store traffic and promotes customer loyalty, leading to
increased sales of video game software and accessories, which
have higher gross margins than video game hardware.

PC Entertainment and Other Software.We purchase PC entertainment software
from over 40 publishers, including Electronic Arts, Microsoft
and Vivendi Universal. We offer PC entertainment software across
a variety of genres, including Sports, Action, Strategy,
Adventure/ Role Playing and Simulation. We also carry a limited
assortment of educational, productivity and reference titles.

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Accessories and Other Products.Video game accessories consist
primarily of controllers, memory cards and other add-ons. PC
entertainment accessories consist primarily of video cards,
joysticks and mice. We also carry strategy guides and magazines,
as well as character-related merchandise, including action
figures and trading cards. We carry over 750 SKUs of accessories
and other products. In general, this category has higher margins
than new video game and PC entertainment products.

The following table sets forth sales mix,
expressed as a percentage of net sales for the periods indicated:

|                                  |                        |                |   |                |   |  |   |    |  
|--------------------------------- | ---------------------- | -------------- | - | -------------- | - |  | - | -- | -
|                                  |                        | 52 Weeks Ended |   | 52 Weeks Ended
|                                  |                        | January 31,    |   | February 1,   
|                                  |                        | 2004           |   | 2003          
|                                  |                        |                |   |               
|Video Games:*                     |                        |                |   |                |   |  |   |   
|                                  | Video Game Software    |                |   | 63             | % |  |   | 58 | %
|                                  | Video Game Hardware    |                |   | 16             |   |  |   | 19 |  
|                                  | Video Game Accessories |                |   | 12             |   |  |   | 12 |  
|PC Software                       |                        |                | 6 |                |   |  | 7 |   
|PC Accessories and Other Products |                        |                | 3 |                |   |  | 4 |   



---



|  |                                   
|- | ----------------------------------
|* | Includes new and used merchandise.

Store Operations

As of January 31, 2004, we operated 1,514
stores, primarily under the GameStop name. Each of our stores
typically carries over 5,000 SKUs. We design our stores to
provide an electronic gaming atmosphere with an engaging and
visually-captivating layout. Our stores are equipped with
several video game sampling areas, which provide our customers
the opportunity to play games before purchase, as well as
equipment to play video game clips. We use store configuration,
in-store signage and product demonstrations to produce marketing
opportunities both for our vendors and for us.



| |              
| | -------------
| | Store Formats



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Strip Center Stores.Our strip center stores, which average
    approximately 1,500 square feet, carry a balanced mix of new and
    used video game products and PC entertainment software. As of
    January 31, 2004, we operated 982 strip center stores in
    the United States, Ireland and Puerto Rico. Our strip center
    stores are located in both high traffic power strip
    centers and local neighborhood strip centers, primarily in
    major metropolitan areas. These locations provide visibility,
    easy access and high frequency of visits. We target strip
    centers that are conveniently located, have a mass merchant or
    supermarket anchor tenant and have a high volume of customers.
|
| |  | Mall-Based Stores.Our mall-based stores, which average
    approximately 1,200 square feet, carry primarily new video game
    products and PC entertainment software, as well as used video
    game products. As of January 31, 2004, we operated 532 mall
    stores in high traffic shopping malls in targeted locations
    throughout the United States, Puerto Rico and Guam.                                                                                                                                                                                                                                                                                                                                          

Site Selection and Locations

Site Selection.We
have a dedicated staff of real estate personnel experienced in
selecting store locations. Site selections for new stores are
made after an extensive review of demographic data and other
information relating to market potential, competitor access and
visibility, compatible nearby tenants, accessible parking,
location visibility, lease terms and the location of our other
stores. Most of our stores are located in highly visible
locations within malls and strip centers.

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##### Table of Contents



Locations.The table
below sets forth the number of our stores located in each state,
the District of Columbia, Ireland, Puerto Rico and Guam as of
January 31, 2004:

|                     |  |           |     | 
|-------------------- |  | --------- | --- | 
|                     |  | Number   
|State                |  | of Stores
|                     |  |          
|Alabama              |  |           | 15  | 
|Alaska               |  |           | 3   | 
|Arizona              |  |           | 27  | 
|Arkansas             |  |           | 5   | 
|California           |  |           | 185 | 
|Colorado             |  |           | 23  | 
|Connecticut          |  |           | 20  | 
|Delaware             |  |           | 7   | 
|District of Columbia |  |           | 1   | 
|Florida              |  |           | 68  | 
|Georgia              |  |           | 35  | 
|Guam                 |  |           | 1   | 
|Hawaii               |  |           | 11  | 
|Idaho                |  |           | 2   | 
|Illinois             |  |           | 79  | 
|Indiana              |  |           | 19  | 
|Iowa                 |  |           | 12  | 
|Ireland              |  |           | 16  | 
|Kansas               |  |           | 7   | 
|Kentucky             |  |           | 17  | 
|Louisiana            |  |           | 13  | 
|Maine                |  |           | 2   | 
|Maryland             |  |           | 43  | 
|Massachusetts        |  |           | 32  | 
|Michigan             |  |           | 60  | 
|Minnesota            |  |           | 30  | 
|Mississippi          |  |           | 7   | 
|Missouri             |  |           | 28  | 
|Montana              |  |           | 4   | 
|Nebraska             |  |           | 3   | 
|Nevada               |  |           | 17  | 
|New Hampshire        |  |           | 7   | 
|New Jersey           |  |           | 68  | 
|New Mexico           |  |           | 7   | 
|New York             |  |           | 83  | 
|North Carolina       |  |           | 24  | 
|North Dakota         |  |           | 5   | 
|Ohio                 |  |           | 70  | 
|Oklahoma             |  |           | 12  | 
|Oregon               |  |           | 10  | 
|Pennsylvania         |  |           | 77  | 

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|               |  |           |       | 
|-------------- |  | --------- | ----- | 
|               |  | Number   
|State          |  | of Stores
|               |  |          
|Puerto Rico    |  |           | 11    | 
|Rhode Island   |  |           | 5     | 
|South Carolina |  |           | 13    | 
|South Dakota   |  |           | 3     | 
|Tennessee      |  |           | 20    | 
|Texas          |  |           | 176   | 
|Utah           |  |           | 17    | 
|Vermont        |  |           | 1     | 
|Virginia       |  |           | 46    | 
|Washington     |  |           | 38    | 
|West Virginia  |  |           | 9     | 
|Wisconsin      |  |           | 20    | 
|               |  |           |       | 
|               |  |           | 1,514 | 
|               |  |           |       | 

Game Informer

We publish Game Informer, a monthly video
game magazine featuring reviews of new title releases, tips and
secrets about existing games and news regarding current
developments in the electronic game industry. The magazine is
sold through subscription and through displays in our stores.
For its February 2004 issue, the magazine had more than
1,500,000 paid subscriptions. According to Advertising Age
magazine, Game Informerhad the largest increase in paid
circulation among U.S. consumer magazines in 2003, with an
increase in excess of 45%. Game Informerrevenues are
also generated through the sale of advertising space. In
addition, we offer the GameStop loyalty card as a bonus with
each paid subscription, providing our subscribers with a
discount on selected merchandise.

E-Commerce

We operate an electronic commerce web site at
www.gamestop.com that allows our customers to buy video game
products and other merchandise on-line. The site also offers
customers information and content about available games, release
dates for upcoming games, and access to store information, such
as location and product availability. In 2003, we entered into
an arrangement with Amazon.com, Inc. under which we are the
exclusive specialty video game retailer listed on Amazon.com.

Advertising

Our stores are primarily located in high traffic,
high visibility areas of regional shopping malls and strip
centers. Given the high foot traffic drawn past the stores
themselves, we use in-store marketing efforts such as window
displays and coming soon signs to attract customers,
as well as to promote used video game products and subscriptions
to our Game Informermagazine. Inside the stores, we
feature selected products through the use of vendor displays,
coming soon or preview videos, signs, catalogs,
point-of-purchase materials and end-cap displays. These
advertising efforts are designed to increase the initial sales
of new titles upon their release. We receive cooperative
advertising and market development funds from manufacturers,
distributors, software publishers and accessory suppliers to
promote their respective products. Generally, vendors agree to
purchase advertising space in one of our advertising vehicles.
Once we run the advertising, the vendor pays to us an agreed
amount.

As part of our brand-building efforts and
targeted growth strategies, in fiscal 2002 and again in fiscal
2003, we expanded our newspaper advertising in certain targeted
markets at certain key times of the year. In addition, we
expanded our use of radio advertising in certain markets to
promote store openings. We plan to continue these efforts in
fiscal 2004.

15



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Information Management

Our operating strategy involves providing a broad
merchandise selection to our customers as quickly and as
cost-effectively as possible. We use our inventory management
systems to maximize the efficiency of the flow of products to
our stores, enhance store efficiency and optimize store in-stock
and overall investment in inventory.

Distribution.We
operate a 210,000 square foot state-of-the-art distribution
center in Grapevine, Texas. By operating with a centralized
distribution facility, we effectively control and minimize
inventory levels. A technologically-advanced conveyor system and
flow-through racks control costs and improve speed of
fulfillment. The technology used in the distribution center
allows for high-volume receiving, distributions to stores and
returns to vendors. Inventory is shipped to each store at least
twice a week, or daily, if necessary, in order to keep stores in
supply of products. In order to support our first-to-market
distribution network, we utilize the services of eight off-site,
third-party operated distribution centers that pick up products
from our suppliers, repackage the products for each of our
stores and ship those products to our stores by package
carriers. 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. We have purchased a
new 420,000 square foot headquarters and distribution center in
Grapevine, Texas and we intend to move our distribution center
operations to that facility by early 2005.

Management Information Systems.Our proprietary inventory management
system and point-of-sale technology show daily sales and
in-store stock by title by store. Systems in place use this data
to automatically generate replenishment shipments to each store
from our distribution center in Grapevine, Texas, enabling each
store to carry a merchandise assortment uniquely tailored to its
own sales mix and rate of sale. Our call lists and reservation
system also provide our centralized buying staff with
information to determine order size and inventory management for
store-by-store inventory allocation. We constantly review and
edit our merchandise categories with the objective of ensuring
that inventory is up-to-date and meets customer needs. We use a
centralized PC network-based information system based in our
corporate offices, in order to minimize initial outlay of
capital while allowing for flexibility and growth as operations
expand.

Our in-store point-of-sale system enables us to
efficiently manage in-store transactions. This proprietary
point-of-sale system has been enhanced to facilitate trade-in
transactions, including automatic look-up of trade-in prices and
printing of machine-readable bar codes to facilitate in-store
restocking of used video games. In addition, our central
database of all used video game products allows us to actively
manage the pricing and product availability of our used video
game products across our store base and re-allocate our used
video game products as necessary.

Field Management and Staff

Our United States, Puerto Rico and Guam store
operations are managed by a centrally located vice president of
stores, three divisional vice presidents and 13 regional store
operations directors. The regions are divided into 120
districts, each with a district manager covering an average of
12 stores. Our stores in Ireland are managed by the founders of
Gamesworld Group Limited, in which we acquired a controlling
interest in June 2003. Each store employs, on average, one
manager, one assistant manager and between two and ten sales
associates, many of whom are part-time employees. We have
cultivated a work environment that attracts employees who are
actively interested in electronic games. We seek to hire and
retain employees who know and enjoy working with our products so
that they are better able to assist customers. To encourage them
to sell the full range of our products, we provide our employees
with targeted incentive programs to drive sales. We also provide
our employees with the opportunity to take home and try new
video games, which enables them to better discuss those games
with our customers. In addition, employees are casually dressed
to encourage customer access and increase the
game-oriented focus of the stores. We also employ 13
regional loss prevention managers who assist the field in
implementing security to prevent theft of our products.

Our stores communicate with our corporate offices
via daily e-mail. This e-mail allows for better tracking of
trends in upcoming titles, competitor strategies and in-stock
inventory positions. In addition, this communication allows
title selection in each store to be continuously updated and
tailored to reflect the tastes

16



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##### Table of Contents



and buying patterns of the stores local
market. These communications also give field management access
to relevant inventory levels and loss prevention information. We
also sponsor an annual store managers conference, to which
we invite all video game software publishers to attend, and
operate an intense educational training program to provide our
employees with information about the video game products that
will be released by those publishers in the holiday season.


Customer Service

Our store personnel provide value-added services
to each customer, such as maintaining lists of regular
customers, notifying each customer by phone when new titles are
available, and reserving new releases for customers with a down
payment to ensure product availability. In addition, our store
personnel readily provide product reviews to ensure customers
are making informed purchasing decisions and offer help-line
numbers to increase a customers enjoyment of the product
upon purchase.

Vendors

We purchase substantially all of our new products
from approximately 85 manufacturers and software publishers and
approximately five distributors. Purchases from the top ten
vendors accounted for approximately 69% of our new product
purchases in fiscal 2003. Only Nintendo, Electronic Arts and
Sony (which accounted for 14%, 14% and 12%, respectively)
individually accounted for more than 10% of our new product
purchases during fiscal 2003. We have established price
protections and return privileges with our primary vendors in
order to reduce the risk of inventory obsolescence. In addition,
we have no purchase contracts with trade vendors and conduct
business on an order-by-order basis, a practice that is typical
throughout the industry. We believe that maintaining and
strengthening our long-term relationships with our vendors is
essential to our operations and continued expansion. We believe
that we have very good relations with our vendors.

Competition

The electronic game industry 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, Target and
Kmart; other video game and PC software specialty stores located
in malls and other locations, including Electronics Boutique;
toy retail chains, including Toys R Us and KB Toys;
mail-order businesses; catalogs; direct sales by software
publishers; online retailers; and computer product and consumer
electronics stores, including Best Buy and Circuit City. In
addition, video games are available for rental from many video
stores, some of whom, like Hollywood Entertainment and
Blockbuster, have increased the availability of video game
products for sale. Video game products may also be distributed
through other methods which may emerge in the future. We also
compete with sellers of used video game products. Additionally,
we compete with other forms of entertainment activities,
including movies, television, theater, sporting events and
family entertainment centers.

Seasonality

Our business, like that of many specialty
retailers, is seasonal, with the major portion of our sales and
operating profit realized during the fourth fiscal quarter,
which includes the holiday selling season. During fiscal 2003,
we generated approximately 40% of our sales and approximately
62% of our operating earnings during the fourth quarter. Any
adverse trend in sales during the holiday selling season could
lower our results of operations for the fourth quarter and the
entire year.

Trademarks

We have a number of trademarks and servicemarks,
including GameStop, Game Informer,
Babbages and FuncoLand, all of
which have been registered by us with the United States Patent
and Trademark Office. We maintain a policy of pursuing
registration of our principal marks and opposing any
infringement of our marks.

17



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Employees

We have approximately 2,100 full-time salaried,
2,000 full-time hourly and between 9,000 and 14,000 part-time
hourly employees depending on the time of year. Fluctuation in
the number of part-time hourly employees is due to the
seasonality of the electronic game industry. We believe that our
relationship with our employees is excellent. None of our
employees is represented by a labor union or is a member of a
collective bargaining unit.

Available Information

We make available on our website
(http://www.gamestop.com), under Investor
Relations  SEC Filings, free of charge, our
annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments
to those reports as soon as reasonably practicable after we
electronically file or furnish such material with the SEC. In
addition, the Companys Code of Standards, Ethics and
Conduct is available on our website under Investor
Relations  Corporate Governance and is
available to our stockholders in print, free of charge, upon
written request to the Companys Investor Relations
Department at GameStop Corp., 2250 William D. Tate Avenue,
Grapevine, Texas 76051.






|        |           
|------- | ----------
|Item 2. | Properties

All of our stores are leased. Store leases
typically provide for an initial lease term of three to ten
years, plus renewal options. This arrangement gives us the
flexibility to pursue extension or relocation opportunities that
arise from changing market conditions. We believe that, as
current leases expire, we will be able to obtain either renewals
at present locations or leases for equivalent locations in the
same area.

The terms of the store leases for the 1,514
leased stores open as of January 31, 2004 expire as follows:

|                                          |  |           |       | 
|----------------------------------------- |  | --------- | ----- | 
|                                          |  | Number   
|Lease Terms to Expire During              |  | of Stores
|                                          |  |          
|(12 Months ending on or about January 31) |  |          
|Expired and in negotiations               |  |           | 183   | 
|2005                                      |  |           | 195   | 
|2006                                      |  |           | 217   | 
|2007                                      |  |           | 151   | 
|2008                                      |  |           | 249   | 
|2009 and later                            |  |           | 519   | 
|                                          |  |           |       | 
|                                          |  |           | 1,514 | 
|                                          |  |           |       | 

In addition to our stores, we lease a 250,000
square foot headquarters and distribution center in Grapevine,
Texas. This lease expires on January 31, 2006.

In March 2004, we purchased a 420,000 square foot
facility in Grapevine, Texas. We will be relocating certain of
our distribution operations to this facility in fiscal 2004 and
will be relocating our headquarters and remaining distribution
center operations to this facility in early 2005. Management
believes this facility will support our long-term growth.

We lease a 7,300 square foot office facility in
Minneapolis, Minnesota which houses the operations of Game
Informermagazine. This lease expires in February 2007.

We lease a 15,000 square foot facility in Dublin,
Ireland, which houses the corporate and distribution operations
for the Companys operations in Ireland. This lease expires
in January 2013.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

On May 29, 2003, former Store Manager Carlos
Moreira (Plaintiff) filed a class action lawsuit
against the Company and its wholly-owned subsidiary Gamestop,
Inc. (collectively GameStop) in Los Angeles

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County Superior Court alleging that
GameStops salaried retail managers were misclassified as
exempt and should have been paid overtime. Plaintiff is seeking
to represent a class of current and former salaried retail
managers who were employed by GameStop in California at anytime
between May 29, 1999 and the present. Plaintiff has alleged
claims for violation of California Labor Code sections 203,
226 and 1194 and California Business and Professions Code
section 17200. Plaintiff is seeking recovery of unpaid
overtime, interest, penalties, attorneys fees and costs.
During court-ordered mediation in March 2004, the parties
reached a settlement in principle which, if approved by the
court, would define the class of current and former salaried
retail managers and would result in an immaterial cost to the
Company. Management expects that the settlement and resolution
of this case will take place in fiscal 2004.


In the ordinary course of our business, we are
from time to time subject to various other legal proceedings. We
do not believe that any such other legal proceedings,
individually or in the aggregate, will have a material adverse
effect on our operations or financial condition.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

There were no matters submitted to a vote of
security holders during the 13 weeks ended January 31,
2004.




PART II






|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

Price Range of Common Stock

The Companys Class A common stock
began trading on the New York Stock Exchange (NYSE)
under the symbol GME on February 13, 2002. As
such, there was no public trading market for the Companys
Class A common stock prior to that time. The Companys
Class B common stock is not publicly traded and is held
entirely by Barnes & Noble.

The following table sets forth, for the periods
indicated, the high and low sales prices of the common stock on
the NYSE Composite Tape.

|               |  |             |       |     |  |   |       | 
|-------------- |  | ----------- | ----- | --- |  | - | ----- | 
|               |  |            
|               |  | Fiscal 2003
|               |  |            
|               |  | High        |       | Low
|               |  |             |       |    
|Fourth Quarter |  | $           | 18.57 |     |  | $ | 14.30 | 
|Third Quarter  |  | $           | 18.92 |     |  | $ | 12.66 | 
|Second Quarter |  | $           | 14.85 |     |  | $ | 11.55 | 
|First Quarter  |  | $           | 13.00 |     |  | $ | 7.59  | 

|                                       |  |             |       |     |  |   |       | 
|-------------------------------------- |  | ----------- | ----- | --- |  | - | ----- | 
|                                       |  |            
|                                       |  | Fiscal 2002
|                                       |  |            
|                                       |  | High        |       | Low
|                                       |  |             |       |    
|Fourth Quarter                         |  | $           | 20.24 |     |  | $ | 8.50  | 
|Third Quarter                          |  | $           | 21.45 |     |  | $ | 14.90 | 
|Second Quarter                         |  | $           | 24.21 |     |  | $ | 15.10 | 
|First Quarter (from February 13, 2002) |  | $           | 21.20 |     |  | $ | 18.02 | 

Approximate Number of Holders of Common
Equity

As of February 23, 2003, there were
approximately 7,300 record holders of the Companys $.001
par value per share Class A common stock. Barnes &
Noble was the sole beneficial holder of the Companys $.001
par value per share Class B common stock.

19



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Dividends

The Company has never declared or paid any
dividends on its common stock. We may consider in the future the
advisability of paying dividends. However, our payment of
dividends is and will continue to be restricted by or subject
to, among other limitations, the terms of the revolving credit
facility we entered into in February 2002, applicable provisions
of federal and state laws, our earnings and various business
considerations, including our financial condition, results of
operations, cash flow, the level of our capital expenditures,
our future business prospects, our status as a holding company
and such other matters that our board of directors deems
relevant. See Liquidity and Capital Resources
included in Managements Discussion and Analysis of
Financial Condition and Results of Operations.

Purchases of Equity Securities by the Issuer
and Affiliated Purchasers

In March 2003, the Board of Directors authorized
a common stock repurchase program for the purchase of up to
$50.0 million of the Companys Class A common
shares. The Company may repurchase shares from time to time in
the open market or through privately negotiated transactions,
depending on prevailing market conditions and other factors. The
repurchased shares will be held in treasury. During the
39 weeks ended November 1, 2003, the Company
repurchased 2,304,100 shares at an average share price of
$15.19. No shares were repurchased during the 13 weeks
ended January 31, 2004. The Company has $14,994,000
available for purchases under this repurchase program.

Securities Authorized for Issuance under
Equity Compensation Plans

Information for our equity compensation plans in
effect as of January 31, 2004, is as follows:

|                                                               |  |                            |            |                      |  |                           |                |  |  |  |           | 
|-------------------------------------------------------------- |  | -------------------------- | ---------- | -------------------- |  | ------------------------- | -------------- |  |  |  | --------- | 
|                                                               |  |                            |            |                      |  | Number of securities     
|                                                               |  |                            |            |                      |  | remaining available for  
|                                                               |  | Number of securities to be |            | Weighted-average     |  | future issuance under    
|                                                               |  | issued upon exercise of    |            | exercise price of    |  | equity compensation plans
|                                                               |  | outstanding options,       |            | outstanding options, |  | (excluding securities    
|                                                               |  | warrants and rights        |            | warrants and rights  |  | reflected in column (a)) 
|Plan category                                                  |  | (a)                        |            | (b)                  |  | (c)                      
|                                                               |  |                            |            |                      |  |                          
|Equity compensation plans approved by security
    holders     |  |                            | 11,307,000 |                      |  | $                         | 9.63           |  |  |  | 6,464,000 | 
|Equity compensation plans not approved by
    security holders |  |                            | 0          |                      |  |                           | not applicable |  |  |  | 0         | 
|                                                               |  |                            |            |                      |  |                           |                |  |  |  |           | 
|Total                                                          |  |                            | 11,307,000 |                      |  | $                         | 9.63           |  |  |  | 6,464,000 | 
|                                                               |  |                            |            |                      |  |                           |                |  |  |  |           | 

On March 2, 2004, an additional 1,591,650
options to purchase our Class A common stock were granted
under the 2001 Incentive Plan at an exercise price of $18.57 per
share. These options vest in equal increments over three years
and expire on March 1, 2014.






|        |                                         
|------- | ----------------------------------------
|Item 6. | Selected Consolidated Financial
    Data

We completed our initial public offering on
February 12, 2002. Before that date, we were a wholly-owned
subsidiary of Barnes & Noble.

The following table sets forth our selected
consolidated financial and operating data for the periods and at
the dates indicated. Our fiscal year is composed of 52 or
53 weeks ending on the Saturday closest to January 31.
The fiscal years ended January 31, 2004, February 1,
2003, February 2, 2002 and January 29, 2000 consisted
of 52 weeks and the fiscal year ended February 3, 2001
consisted of 53 weeks. The Statement of Operations
Data for the fiscal years 2003, 2002 and 2001 and the
Balance Sheet Data as of January 31, 2004 and
February 1, 2003 are derived from, and are qualified by
reference to, our audited financial statements which are
included elsewhere in this Form 10-K. The Statement
of Operations Data for the 39 weeks ended
October 30, 1999, the 13 weeks ended January 29,
2000 and for the fiscal year ended February 3, 2001 and the

20



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##### Table of Contents



Balance Sheet Data as of
February 2, 2002, February 3, 2001 and
January 29, 2000 are derived from our audited financial
statements which are not included elsewhere in this
Form 10-K.


Our wholly-owned subsidiary Babbages Etc.
LLC (Babbages) began operations in November
1996. In October 1999, Babbages was acquired by, and
became a wholly-owned subsidiary of, Barnes & Noble. Because
our financial statements subsequent to the acquisition by Barnes
& Noble are not directly comparable to those prior to the
acquisition, our audited financial statements for the period
ended January 29, 2000, which are not included elsewhere in
this Form 10-K, and the following table make a distinction
between the predecessor company and the
successor company. In June 2000, Barnes & Noble
acquired Funco, Inc. (Funco) and thereafter,
Babbages became a wholly-owned subsidiary of Funco. The
acquisition of Funco has been accounted for under the purchase
method of accounting. In December 2000, Funco changed its name
to GameStop, Inc.

Our selected financial data set forth below
should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and
notes thereto included elsewhere in this Form 10-K.

|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------- | --------- | ----------- |  | ----------- | --------- | ----------- |  | ----------- | --------- | ----------- |  | - | ------- | - |  | - | ------- |  |  | - | ------- | -
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           | Predecessor
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |            
|                                                                                                       |  | Fiscal Year                                         |           | Fiscal Year |  | Fiscal Year |           | Fiscal Year |  | 13 Weeks    |           | 39 Weeks   
|                                                                                                       |  | Ended                                               |           | Ended       |  | Ended       |           | Ended       |  | Ended       |           | Ended      
|                                                                                                       |  | January 31,                                         |           | February 1, |  | February 2, |           | February 3, |  | January 29, |           | October 30,
|                                                                                                       |  | 2004                                                |           | 2003        |  | 2002        |           | 2001        |  | 2000        |           | 1999       
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |            
|                                                                                                       |  |                                                    
|                                                                                                       |  | (In thousands, except per share and operating data)
|Statement of Operations Data:                                                                          |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Sales                                                                                                  |  | $                                                   | 1,578,838 |             |  | $           | 1,352,791 |             |  | $           | 1,121,138 |             |  | $ | 756,697 |   |  | $ | 223,748 |  |  | $ | 329,392 |  
|Cost of sales                                                                                          |  |                                                     | 1,142,264 |             |  |             | 1,009,491 |             |  |             | 854,035   |             |  |   | 570,995 |   |  |   | 174,808 |  |  |   | 246,865 |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Gross profit                                                                                           |  |                                                     | 436,574   |             |  |             | 343,300   |             |  |             | 267,103   |             |  |   | 185,702 |   |  |   | 48,940  |  |  |   | 82,527  |  
|Selling, general and administrative expenses                                                           |  |                                                     | 303,243   |             |  |             | 233,676   |             |  |             | 202,719   |             |  |   | 157,891 |   |  |   | 30,019  |  |  |   | 68,112  |  
|Acquisition incentive bonuses                                                                          |  |                                                     |          |             |  |             |          |             |  |             |          |             |  |   |        |   |  |   |        |  |  |   | 26,789  |  
|Depreciation and amortization                                                                          |  |                                                     | 28,947    |             |  |             | 22,553    |             |  |             | 19,172    |             |  |   | 12,974  |   |  |   | 1,926   |  |  |   | 4,475   |  
|Amortization of goodwill                                                                               |  |                                                     |          |             |  |             |          |             |  |             | 11,125    |             |  |   | 9,223   |   |  |   | 1,687   |  |  |   |        |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Operating earnings (loss)                                                                              |  |                                                     | 104,384   |             |  |             | 87,071    |             |  |             | 34,087    |             |  |   | 5,614   |   |  |   | 15,308  |  |  |   | (16,849 | )
|Interest expense (income), net                                                                         |  |                                                     | (804      | )           |  |             | (630      | )           |  |             | 19,452    |             |  |   | 23,411  |   |  |   | 3,123   |  |  |   | 972     |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Earnings (loss) before income taxes                                                                    |  |                                                     | 105,188   |             |  |             | 87,701    |             |  |             | 14,635    |             |  |   | (17,797 | ) |  |   | 12,185  |  |  |   | (17,821 | )
|Income tax expense (benefit)(1)                                                                        |  |                                                     | 41,721    |             |  |             | 35,297    |             |  |             | 7,675     |             |  |   | (5,836  | ) |  |   | 4,968   |  |  |   |        |  
|Pro forma income tax benefit(2)                                                                        |  |                                                     |          |             |  |             |          |             |  |             |          |             |  |   |        |   |  |   |        |  |  |   | (7,142  | )
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Net earnings (loss)(3)                                                                                 |  | $                                                   | 63,467    |             |  | $           | 52,404    |             |  | $           | 6,960     |             |  | $ | (11,961 | ) |  | $ | 7,217   |  |  | $ | (10,679 | )
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Net earnings (loss) per share 
    basic(3)                                                           |  | $                                                   | 1.13      |             |  | $           | 0.93      |             |  | $           | 0.19      |             |  | $ | (0.33   | ) |  | $ | 0.20    |  |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Weighted average shares outstanding 
    basic                                                        |  |                                                     | 56,330    |             |  |             | 56,289    |             |  |             | 36,009    |             |  |   | 36,009  |   |  |   | 36,009  |  |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Net earnings (loss) per share 
    diluted(3)                                                         |  | $                                                   | 1.06      |             |  | $           | 0.87      |             |  | $           | 0.18      |             |  | $ | (0.33   | ) |  | $ | 0.20    |  |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Weighted average shares outstanding 
    diluted                                                      |  |                                                     | 59,764    |             |  |             | 60,419    |             |  |             | 39,397    |             |  |   | 36,009  |   |  |   | 36,009  |  |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Other Financial Data:                                                                                  |  |                                                     |           |             |  |             |           |             |  |             |           |             |  |   |         |   |  |   |         |  |  |   |         |  
|Net earnings (loss) excluding the after-tax
    effect of goodwill amortization(4)                     |  | $                                                   | 63,467    |             |  | $           | 52,404    |             |  | $           | 15,373    |             |  | $ | (5,212  | ) |  | $ | 8,295   |  |  | $ | (10,679 | )
|Net earnings (loss) per share excluding the
    after-tax effect of goodwill amortization  diluted(4) |  | $                                                   | 1.06      |             |  | $           | 0.87      |             |  | $           | 0.39      |             |  | $ | (0.14   | ) |  | $ | 0.23    |  |  |   |         |  

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|                                              |  |                                                     |         |             |  |             |         |             |  |             |         |             |  |   |         |    |  |   |         |   |  |   |         |  
|--------------------------------------------- |  | --------------------------------------------------- | ------- | ----------- |  | ----------- | ------- | ----------- |  | ----------- | ------- | ----------- |  | - | ------- | -- |  | - | ------- | - |  | - | ------- | -
|                                              |  |                                                     |         |             |  |             |         |             |  |             |         | Predecessor
|                                              |  |                                                     |         |             |  |             |         |             |  |             |         |            
|                                              |  | Fiscal Year                                         |         | Fiscal Year |  | Fiscal Year |         | Fiscal Year |  | 13 Weeks    |         | 39 Weeks   
|                                              |  | Ended                                               |         | Ended       |  | Ended       |         | Ended       |  | Ended       |         | Ended      
|                                              |  | January 31,                                         |         | February 1, |  | February 2, |         | February 3, |  | January 29, |         | October 30,
|                                              |  | 2004                                                |         | 2003        |  | 2002        |         | 2001        |  | 2000        |         | 1999       
|                                              |  |                                                     |         |             |  |             |         |             |  |             |         |            
|                                              |  |                                                    
|                                              |  | (In thousands, except per share and operating data)
|Store Operating Data:                         |  |                                                     |         |             |  |             |         |             |  |             |         |             |  |   |         |    |  |   |         |   |  |   |         |  
|Stores open at the end of period              |  |                                                     | 1,514   |             |  |             | 1,231   |             |  |             | 1,038   |             |  |   | 978     |    |  |   | 526     |   |  |   |         |  
|Comparable store sales increase (decrease)(5) |  |                                                     | 0.8     | %           |  |             | 11.4    | %           |  |             | 32.0    | %           |  |   | (6.7    | )% |  |   |         |   |  |   |         |  
|Inventory turnover                            |  |                                                     | 4.9     |             |  |             | 4.9     |             |  |             | 5.2     |             |  |   | 4.6     |    |  |   |         |   |  |   |         |  
|Balance Sheet Data:                           |  |                                                     |         |             |  |             |         |             |  |             |         |             |  |   |         |    |  |   |         |   |  |   |         |  
|Working capital (deficit)                     |  | $                                                   | 188,902 |             |  | $           | 174,482 |             |  | $           | 31,107  |             |  | $ | (1,726  | )  |  | $ | (28,849 | ) |  | $ | (40,409 | )
|Total assets                                  |  |                                                     | 898,924 |             |  |             | 803,909 |             |  |             | 606,843 |             |  |   | 509,757 |    |  |   | 307,922 |   |  |   | 124,413 |  
|Total debt                                    |  |                                                     |        |             |  |             |        |             |  |             | 399,623 |             |  |   | 385,148 |    |  |   | 203,613 |   |  |   |        |  
|Total liabilities                             |  |                                                     | 304,891 |             |  |             | 255,234 |             |  |             | 610,828 |             |  |   | 530,367 |    |  |   | 316,571 |   |  |   | 140,279 |  
|Stockholders equity (deficit)                |  |                                                     | 594,033 |             |  |             | 548,675 |             |  |             | (3,985  | )           |  |   | (20,610 | )  |  |   | (8,649  | ) |  |   | (15,866 | )



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Prior to October 30, 1999, when
    Babbages was acquired by Barnes & Noble,
    Babbages was not subject to federal and most state income
    taxes, and its earnings were taxed directly to its members. For
    the 39 weeks ended October 30, 1999, the financial
    statements include only a provision for state income taxes for
    those states in which Babbages was taxed as a
    C corporation. For ease of comparison, provisions
    for state income taxes are included in the pro forma income tax
    benefit, which is described in footnote (2). For periods
    after October 30, 1999, the financial statements reflect
    income tax expense (benefit) as if we were taxed as a
    C corporation on a stand-alone basis.
|   
|(2) | For the 39 weeks ended October 30,
    1999, the pro forma income tax benefit reflects taxes as if we
    had been a C corporation in all jurisdictions and
    includes certain state income taxes in the amount of $100.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) | Net loss for the 39 weeks ended
    October 30, 1999 reflect pro forma taxes as described in
    footnote (2) above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | Net earnings (loss) excluding the after-tax
    effect of goodwill amortization is presented here to provide
    additional information about our operations. These items should
    be considered in addition to, but not as a substitute for or
    superior to, operating earnings, net earnings, cash flow and
    other measures of financial performance prepared in accordance
    with generally accepted accounting principles. Note 6 of
    Notes to Consolidated Financial Statements of the
    Company presents a reconciliation of net earnings to net
    earnings (loss) excluding the after-tax effect of goodwill
    amortization.                                                                                                 
|   
|(5) | Stores are included in our comparable store sales
    base beginning in the 13th month of operation. Comparable store
    sales for the fiscal year ended February 3, 2001 were
    computed using the first 52 weeks of the 53 week
    fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

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

General

We are the largest specialty retailer of video
game products and PC entertainment software in the United
States, based on the number of U.S. retail stores we operate and
our total U.S. revenues. We sell new and used

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video game hardware, video game software and
accessories, as well as PC entertainment software and related
accessories and other merchandise. As of January 31, 2004,
we operated 1,514 stores, in 49 states, the District of
Columbia, Ireland, Puerto Rico and Guam, primarily under the
name GameStop. We also operate an electronic commerce web site
under the name gamestop.com and publish Game Informer,the industrys largest circulation multi-platform video
game magazine in the United States.


Our fiscal year is composed of 52 or
53 weeks ending on the Saturday closest to January 31.
The fiscal years ended January 31, 2004, or fiscal
2003, February 1, 2003, or fiscal 2002,
and February 2, 2002, or fiscal 2001, consisted
of 52 weeks.

Our wholly-owned subsidiary Babbages began
operations in November 1996. In October 1999, Babbages was
acquired by, and became a wholly-owned subsidiary of, Barnes
& Noble. In June 2000, Barnes & Noble acquired Funco and
thereafter, Babbages became a wholly-owned subsidiary of
Funco. In December 2000, Funco changed its name to GameStop, Inc.

Growth in the video game industry is driven by
the introduction of new technology. In October 2000, Sony
introduced PlayStation 2 and in June 2001 Nintendo introduced
Game Boy Advance. Microsoft introduced Xbox and Nintendo
introduced GameCube in November 2001. Nintendo introduced the
Game Boy Advance SP in March 2003. As is typical following the
introduction of new video game platforms, sales of new video
game hardware generally increase as a percentage of sales in the
first full year following introduction. As video game platforms
mature, the sales mix attributable to complementary video game
software and accessories, which generate higher gross margins,
generally increases in the second and third years. The net
effect is generally a decline in gross margins in the first full
year following new platform releases and an increase in gross
margins in the second and third years. Unit sales of maturing
video game platforms are typically also driven by
manufacturer-funded retail price decreases, further driving
sales of related software and accessories. The retail prices for
the PlayStation 2, the Xbox and the GameCube were reduced in May
2002, resulting in an increase in unit sales and sales of the
related software and accessories from fiscal 2001 to fiscal
2002. The retail prices for the PlayStation 2 and the Xbox were
reduced again, but to a much lesser extent, in May 2003, which
again led to an increase in unit sales, but not to the extent of
the increases caused by the price reductions in the prior year.
In September 2003, Nintendo reduced the retail price of the
GameCube, which resulted in a significant increase in unit sales
and sales of the related software and accessories during the
fourth quarter of 2003. We expect that the installed base of
these hardware platforms and sales of related software and
accessories will increase in the future.

Critical Accounting Policies

The Company believes that the following are its
most significant accounting polices which are important in
determining the reporting of transactions and events.

Use of Estimates.The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. In preparing these
financial statements, management has made its best estimates and
judgments of certain amounts included in the financial
statements, giving due consideration to materiality. Changes in
the estimates and assumptions used by management could have
significant impact on the Companys financial results.
Actual results could differ from those estimates.

Revenue Recognition.Revenue from the sales of the
Companys products is recognized at the time of sale. The
sales of used video game products are recorded at the retail
price charged to the customer. Sales returns (which are not
significant) are recognized at the time returns are made.
Subscription and advertising revenues are recorded upon release
of magazines for sale to consumers and are stated net of sales
discounts. Magazine subscription revenue is recognized on a
straight-line basis over the subscription period.

Merchandise Inventories.Our merchandise inventories are
carried at the lower of cost or market using the average cost
method. Used video game products traded in by customers are
recorded as inventory at the

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amount of the store credit given to the customer.
In valuing inventory, management is required to make assumptions
regarding the necessity of reserves required to value
potentially obsolete or over-valued items at the lower of cost
or market. Management considers quantities on hand, recent
sales, potential price protections and returns to vendors, among
other factors, when making these assumptions.


Property and Equipment.Property and equipment are carried at
cost less accumulated depreciation and amortization.
Depreciation is computed using the straight-line method over
estimated useful lives (ranging from two to eight years).
Maintenance and repairs are expensed as incurred, while
betterments and major remodeling costs are capitalized.
Leasehold improvements are capitalized and amortized over the
shorter of their estimated useful lives or the terms of the
respective leases (generally ranging from three to ten years).
Capitalized lease acquisition costs are being amortized over the
average lease terms of the underlying leases. Costs incurred in
purchasing management information systems are capitalized and
included in property and equipment. These costs are amortized
over their estimated useful lives from the date the systems
become operational. The Company periodically reviews its
property and equipment whenever events or changes in
circumstances indicate that their carrying amounts may not be
recoverable or their depreciation or amortization periods should
be accelerated. The Company assesses recoverability based on
several factors, including managements intention with
respect to its stores and those stores projected
undiscounted cash flows. An impairment loss would be recognized
for the amount by which the carrying amount of the assets
exceeds the present value of their projected cash flows. No
write-downs have been necessary through January 31, 2004.

Goodwill.Goodwill,
aggregating $340.0 million, was recorded in the acquisition
of Funco and through the application of push-down
accounting in accordance with SAB 54 in connection with the
acquisition of Babbages by a subsidiary of Barnes &
Noble. Goodwill in the amount of $2.9 million was recorded
in the acquisition of Gamesworld Group Limited in June 2003.
Goodwill represents the excess purchase price over tangible net
assets acquired. Effective February 3, 2002, the Company
adopted the provisions of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142). SFAS 142
requires, among other things, that companies no longer amortize
goodwill, but instead evaluate goodwill for impairment on at
least an annual basis. In accordance with the requirements of
SFAS 142, the Company completed the initial impairment test
of the goodwill attributable to its reporting unit as of
February 3, 2002, and concluded that none of its goodwill
was impaired. As part of this analysis, the Company determined
that it has one reporting unit based upon the similar economic
characteristics of its operations. Fair value of this reporting
unit was estimated using market capitalization methodologies.
The Company also evaluates the goodwill of its reporting unit
for impairment at least annually. The Company elected to perform
its annual impairment test during the fourth quarter of both
fiscal 2002 and fiscal 2003 and concluded that none of its
goodwill was impaired. Note 6 of Notes to Consolidated
Financial Statements of the Company provides additional
information concerning goodwill. Prior to the adoption of the
provisions of SFAS 142, the Companys goodwill was
amortized on a straight-line basis over a 30-year period. At
February 2, 2002, accumulated amortization was
$22.0 million.

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Results of Operations

The following table sets forth certain income
statement items as a percentage of sales for the periods
indicated:

|                                             |  |             |       |             |  |             |       |   |  |  |       |  
|-------------------------------------------- |  | ----------- | ----- | ----------- |  | ----------- | ----- | - |  |  | ----- | -
|                                             |  | Fiscal Year |       | Fiscal Year |  | Fiscal Year
|                                             |  | Ended       |       | Ended       |  | Ended      
|                                             |  | January 31, |       | February 1, |  | February 2,
|                                             |  | 2004        |       | 2003        |  | 2002       
|                                             |  |             |       |             |  |            
|Statement of Operations Data:                |  |             |       |             |  |             |       |   |  |  |       |  
|Sales                                        |  |             | 100.0 | %           |  |             | 100.0 | % |  |  | 100.0 | %
|Cost of sales                                |  |             | 72.4  |             |  |             | 74.6  |   |  |  | 76.2  |  
|                                             |  |             |       |             |  |             |       |   |  |  |       |  
|Gross profit                                 |  |             | 27.6  |             |  |             | 25.4  |   |  |  | 23.8  |  
|Selling, general and administrative expenses |  |             | 19.2  |             |  |             | 17.3  |   |  |  | 18.1  |  
|Depreciation and amortization                |  |             | 1.8   |             |  |             | 1.7   |   |  |  | 1.7   |  
|Amortization of goodwill                     |  |             | 0.0   |             |  |             | 0.0   |   |  |  | 1.0   |  
|                                             |  |             |       |             |  |             |       |   |  |  |       |  
|Operating earnings                           |  |             | 6.6   |             |  |             | 6.4   |   |  |  | 3.0   |  
|Interest expense, net                        |  |             | 0.0   |             |  |             | (0.1  | ) |  |  | 1.7   |  
|                                             |  |             |       |             |  |             |       |   |  |  |       |  
|Earnings before income taxes                 |  |             | 6.6   |             |  |             | 6.5   |   |  |  | 1.3   |  
|Income tax expense                           |  |             | 2.6   |             |  |             | 2.6   |   |  |  | 0.7   |  
|                                             |  |             |       |             |  |             |       |   |  |  |       |  
|Net earnings                                 |  |             | 4.0   | %           |  |             | 3.9   | % |  |  | 0.6   | %
|                                             |  |             |       |             |  |             |       |   |  |  |       |  

Fiscal 2003
Compared to Fiscal 2002

Sales increased by $226.0 million, or 16.7%,
from $1,352.8 million in fiscal 2002 to
$1,578.8 million in fiscal 2003. The increase in sales was
primarily attributable to the additional sales resulting from
283 net new stores opened since February 1, 2003 and to a
0.8% increase in comparable store sales. Stores are included in
our comparable store sales base beginning in the thirteenth
month of operation. Comparable store sales increased a modest
0.8% as declining video game hardware price points offset a
significant increase in video game software sales.

Cost of sales increased by $132.8 million,
or 13.2%, from $1,009.5 million in fiscal 2002 to
$1,142.3 million in fiscal 2003. Cost of sales as a
percentage of sales decreased from 74.6% in fiscal 2002 to 72.4%
in fiscal 2003. This decrease was primarily the result of the
implementation of EITF 02-16 (see footnote 2 to the
Consolidated Financial Statements), requiring certain vendor
allowances to be deducted from cost of sales, and the shift in
sales mix from lower margin video game hardware to higher margin
PlayStation 2, Game Boy Advance, Xbox and GameCube video
game software and used video game products. The implementation
of EITF 02-16 led to a decrease in cost of sales of
$21.6 million, or 1.4% of sales.

Selling, general and administrative expenses
increased by $69.5 million, or 29.7%, from
$233.7 million in fiscal 2002 to $303.2 million in
fiscal 2003. The increase was primarily attributable to the
increase in the number of stores in operation and the related
increases in store, distribution, and corporate office operating
expenses. In addition, implementing EITF 02-16 caused an
increase of $26.8 million in selling, general and
administrative expenses. Selling, general and administrative
expenses as a percentage of sales increased from 17.3% in fiscal
2002 to 19.2% in fiscal 2003. The increase in selling, general
and administrative expenses as a percentage of sales was
primarily due to the effect of implementing EITF 02-16.

Depreciation and amortization expense increased
from $22.6 million in fiscal 2002 to $28.9 million in
fiscal 2003. This increase of $6.3 million was due to the
capital expenditures for new stores, management information
systems and distribution center enhancements during the fiscal
year.

Interest income resulting from the investment of
excess cash balances decreased from $2.0 million in fiscal
2002 to $1.5 million in fiscal 2003 due to a decrease in
the level of investments and the average yield on the
investments. Interest expense decreased by $0.7 million,
from $1.4 million in fiscal 2002 to $0.7 million in

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fiscal 2003. The decrease was attributable to the
repayment of $250.0 million in debt in February 2002 using
the proceeds of the Companys February 2002 public offering
and the contribution of the remaining $150.0 million in
debt to paid-in-capital by Barnes & Noble.


Income tax expense increased by
$6.4 million, from $35.3 million in fiscal 2002 to
$41.7 million in fiscal 2003. The Companys effective
tax rate decreased from 40.2% in fiscal 2002 to 39.7% in fiscal
2003 due primarily to tax-exempt interest income and state
income tax credits, which are expected to recur. See
Note 12 of Notes to Consolidated Financial
Statements of the Company for additional information
regarding income taxes.

The factors described above led to an increase in
operating earnings of $17.3 million, or 19.9%, from
$87.1 million in fiscal 2002 to $104.4 million in
fiscal 2003 and an increase in net earnings of
$11.1 million, or 21.2%, from $52.4 million in fiscal
2002 to $63.5 million in fiscal 2003.

Fiscal 2002
Compared to Fiscal 2001

Sales increased by $231.7 million, or 20.7%,
from $1,121.1 million in fiscal 2001 to
$1,352.8 million in fiscal 2002. The increase in sales was
primarily attributable to an 11.4% increase in comparable store
sales and the additional sales resulting from 210 new stores
opened since February 2, 2002. The comparable store sales
increase was primarily due to sales of PlayStation 2, Xbox
and GameCube hardware, software and accessories, following the
launch of these new video game platforms in October 2000 and
November 2001, respectively, and the increase in sales of used
video game products. The sales of these new hardware platforms
and related products were partially offset by sales declines in
PlayStation, Nintendo 64, Dreamcast and PC entertainment
software from the prior year.

Cost of sales increased by $155.5 million,
or 18.2%, from $854.0 million in fiscal 2001 to
$1,009.5 million in fiscal 2002. Cost of sales as a
percentage of sales decreased from 76.2% in fiscal 2001 to 74.6%
in fiscal 2002. This decrease was the result of the shift in
sales mix from lower margin video game hardware to higher margin
PlayStation 2, Game Boy Advance, Xbox and GameCube video
game software and accessories and used video game products.
Sales of new video game hardware generally increase as a
percentage of sales in the first full year following the
introduction of next generation platforms. As video game
platforms mature, the sales mix attributable to complementary
video game software and accessories, which generate higher gross
margins, generally increases in the second and third years. The
net effect is generally a decline in gross margins in the first
full year following new platform releases and an increase in
gross margins in the second and third years.

Selling, general and administrative expenses
increased by $31.0 million, or 15.3%, from
$202.7 million in fiscal 2001 to $233.7 million in
fiscal 2002. The increase was primarily attributable to the
increase in the number of stores in operation and the related
increases in store, distribution, and corporate office operating
expenses. Selling, general and administrative expenses as a
percentage of sales decreased from 18.1% in fiscal 2001 to 17.3%
in fiscal 2002. The decrease in selling, general and
administrative expenses as a percentage of sales was due to the
economies achieved in distribution and corporate operating
expenses and the store operating efficiencies gained as a result
of the increase in comparable store sales and an intense focus
on expense controls.

Depreciation and amortization expense increased
from $19.2 million for fiscal 2001 to $22.6 million in
fiscal 2002. This increase of $3.4 million was due to the
capital expenditures for new stores, management information
systems and distribution center enhancements during the fiscal
year.

Amortization of goodwill was $11.1 million
in fiscal 2001. In accordance with SFAS No. 142, the
related goodwill was not amortized during fiscal 2002.

Interest expense, net of interest income,
decreased by $20.1 million from $19.5 million of net
interest expense in fiscal 2001 to net interest income of
$0.6 million in fiscal 2002. The decrease was attributable
to the repayment of $250.0 million in debt in February 2002
using a portion of the proceeds of the public offering and the
contribution of the remaining $150.0 million in debt to
additional paid-in-capital by Barnes & Noble. The interest
income resulted from the investment of excess cash balances.

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Income tax expense increased by
$27.6 million, from $7.7 million in fiscal 2001 to
$35.3 million in fiscal 2002. The Companys effective
tax rate decreased from 52.4% in fiscal 2001 to 40.2% in fiscal
2002 due to the elimination of the amortization of goodwill in
accordance with SFAS 142. The amortization of goodwill
associated with the Funco acquisition is not deductible for tax
purposes and led to an increase in our effective tax rate in
fiscal 2001 of 10.5% compared to fiscal 2002. See Note 12 of
Notes to Consolidated Financial Statements of the
Company for additional information regarding income taxes.

The factors described above led to an increase in
operating earnings of $53.0 million, or 155.4%, from
$34.1 million in fiscal 2001 to $87.1 million in
fiscal 2002 and an increase in net earnings of
$45.4 million, or 648.6%, from $7.0 million in fiscal
2001 to $52.4 million in fiscal 2002.

Liquidity and Capital Resources

Subsequent to our acquisition by
Barnes & Noble in October 1999, and prior to our
initial public offering on February 12, 2002, our
operations were funded by cash flows from operations and
advances from Barnes & Noble. Those advances were
treated as an intercompany loan owed to Barnes & Noble
by us. As of February 2, 2002, we were indebted to
Barnes & Noble in the amount of $399.6 million.

On February 12, 2002, we registered and sold
an aggregate of 20,763,888 shares of our Class A common
stock at a price of $18.00 per share. The aggregate price of the
offering amount registered and sold was approximately
$373.7 million. The net proceeds from the initial public
offering were $347.3 million. A portion of the proceeds was
used to repay $250.0 million of our indebtedness to
Barnes & Noble. Upon closing the initial public
offering, Barnes & Noble contributed the difference
between the aggregate amount of the intercompany loans and
$250.0 million as additional paid-in-capital. The amount of
the capital contribution was $150.0 million. Of the balance
of the proceeds (approximately $97.3 million),
approximately $33.8 million was used for capital
expenditures and the remainder was used for working capital and
general corporate purposes.

The combination of the net proceeds of the
initial public offering of $347.3 million, the contribution
of $150.0 million to additional paid-in-capital by
Barnes & Noble and net earnings of $52.4 million
in fiscal 2002 all led to an increase in stockholders
equity from a deficit of $4.0 million as of
February 2, 2002 to $548.7 million as of
February 1, 2003.

During fiscal 2003, cash provided by operations
was $69.8 million, compared to cash provided by operations
of $92.9 million in fiscal 2002. The decrease in cash
provided by operations of $23.1 million from fiscal 2002 to
fiscal 2003 was primarily due to the payment in fiscal 2003 of
income taxes payable of $15.8 million outstanding as of the
end of fiscal 2002 and the payment of income taxes estimated to
be due for fiscal 2003. In addition, in fiscal 2003, the Company
invested in merchandise inventories to support the overall
growth of the Company and the anticipated store openings in
early fiscal 2004. In fiscal 2003, cash provided by operations
was primarily due to net income of $63.5 million,
depreciation and amortization of $28.9 million and an
increase in accounts payable of $40.0 million, which were
offset partially by an increase in merchandise inventories of
$59.8 million. In fiscal 2002, cash provided by operations
was primarily due to net income of $52.4 million,
depreciation and amortization of $22.6 million and an
increase in accounts payable of $36.4 million, which were
offset partially by an increase in merchandise inventories of
$23.0 million.

Cash used in investing activities was
$66.6 million and $40.3 million during fiscal 2003 and
fiscal 2002, respectively. During fiscal 2003 and 2002, we had
capital expenditures of $63.0 million and
$39.5 million, respectively, to open new stores, remodel
existing stores, and invest in distribution and information
systems. Our future capital requirements will depend on the
number of new stores we open and the timing of those openings
within a given fiscal year. We opened 300 stores in fiscal 2003
and expect to open between 300 and 330 stores in fiscal 2004.
Projected capital expenditures for fiscal 2004 are approximately
$85 million, to be used primarily to fund new store
openings, acquire a new headquarters and distribution center and
invest in distribution and information systems.

The projected capital expenditures for fiscal
2004 of approximately $85 million include approximately
$21 million to purchase, improve and equip the 420,000
square foot headquarters and distribution center

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facility in Grapevine, Texas which the Company
acquired in March 2004. We expect that the total cost to
purchase, improve and equip this facility will be approximately
$29 million. The distribution systems in this facility are
expected to be ready for testing in late 2004 and the facility
is expected to be fully-operational in 2005 and all headquarters
and distribution functions will be relocated at that time.


In March 2003, the Board of Directors authorized
a common stock repurchase program for the purchase of up to
$50.0 million of the Companys Class A common
shares. The Company may repurchase shares from time to time in
the open market or through privately negotiated transactions,
depending on prevailing market conditions and other factors. The
repurchased shares will be held in treasury. During fiscal 2003,
the Company repurchased 2,304,100 shares at an average share
price of $15.19.

In February 2002, the Company entered into a
$75.0 million senior secured revolving credit facility
which expires in February 2005. The revolving credit facility is
governed by an eligible inventory borrowing base agreement,
defined as 50% of non-defective inventory. Loans incurred under
the credit facility will be maintained from time to time, at the
Companys option, as: (1) base rate loans which bear
interest at the base rate (defined in the credit facility as the
higher of (a) the administrative agents announced
base rate, or (b) 1/2 of 1% in excess of the federal funds
effective rate, each as in effect from time to time); or
(2) LIBOR loans bearing interest at the LIBOR rate for the
applicable interest period, in each case plus an applicable
interest margin. In addition, the Company is required to pay a
commitment fee of 0.375% for any unused amounts of the revolving
credit facility. Any borrowings under the revolving credit
facility are secured by the assets of the Company. The revolving
credit facility generally restricts our ability to pay dividends
and requires the Company to maintain certain financial ratios.
There have been no borrowings under the revolving credit
facility.

Based on our current operating plans, we believe
that available cash balances and cash generated from our
operating activities will be sufficient to fund our operations,
store expansion and remodeling activities and corporate capital
expenditure programs for at least the next 12 months.

Contractual Obligations

The following table sets forth our contractual
obligations as of January 31, 2004:

|                                                                                    |  |                        |       |           |  |           |      |           |  |         |      |  |  |   |      |  |  |   |      | 
|----------------------------------------------------------------------------------- |  | ---------------------- | ----- | --------- |  | --------- | ---- | --------- |  | ------- | ---- |  |  | - | ---- |  |  | - | ---- | 
|                                                                                    |  |                       
|                                                                                    |  | Payments Due by Period
|                                                                                    |  |                       
|                                                                                    |  |                        |       | Less Than |  |           |      | More Than
|Contractual Obligations                                                             |  | Total                  |       | 1 Year    |  | 1-3 Years |      | 3-5 Years |  | 5 Years
|                                                                                    |  |                        |       |           |  |           |      |           |  |        
|Long-Term Debt                                                                      |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|Capital Lease Obligations                                                           |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|Operating Leases                                                                    |  | $                      | 272.3 |           |  | $         | 59.5 |           |  | $       | 94.0 |  |  | $ | 61.6 |  |  | $ | 57.2 | 
|Purchase Obligations                                                                |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|Other Long-Term Liabilities Reflected on the
    Companys Balance Sheet Under GAAP |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|                                                                                    |  |                        |       |           |  |           |      |           |  |         |      |  |  |   |      |  |  |   |      | 
|Total                                                                               |  | $                      | 272.3 |           |  | $         | 59.5 |           |  | $       | 94.0 |  |  | $ | 61.6 |  |  | $ | 57.2 | 
|                                                                                    |  |                        |       |           |  |           |      |           |  |         |      |  |  |   |      |  |  |   |      | 

In addition to minimum rentals, the operating
leases generally require the Company to pay all insurance, taxes
and other maintenance costs and may provide for percentage
rentals. Percentage rentals are based on sales performance in
excess of specified minimums at various stores.

As of January 31, 2004, we had no other
commercial commitments such as standby letters of credit,
guarantees, or standby repurchase obligations outstanding.

Off-Balance Sheet Arrangements

As of January 31, 2004, the Company had no
off-balance sheet arrangements as defined in Item 303 of
Regulation S-K.

28



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##### Table of Contents



Impact of Inflation

We do not believe that inflation has had a
material effect on our net sales or results of operations.

Certain Relationships and Related
Transactions

The Company operates departments within ten
bookstores operated by Barnes & Noble. The Company pays
a license fee to Barnes & Noble in amounts equal to
7.0% of the gross sales of such departments. Management deems
the license fee to be reasonable and based upon terms equivalent
to those that would prevail in an arms length transaction.
During the 52 weeks ended January 31, 2004,
February 1, 2003 and February 2, 2002, these charges
amounted to $1.0 million, $1.1 million and
$1.1 million, respectively.

The Company participates in Barnes &
Nobles workers compensation, property and general
liability insurance programs. The costs incurred by
Barnes & Noble under these programs are allocated to
the Company based upon the Companys total payroll expense,
property and equipment, and insurance claim history. Management
deems the allocation methodology to be reasonable. During the
52 weeks ended January 31, 2004, February 1, 2003
and February 2, 2002, these allocated charges amounted to
$2.4 million, $1.7 million and $1.3 million,
respectively.

Prior to the completion of the Companys
initial public offering, the Company utilized the management and
strategic advisory services of Leonard Riggio, the Chairman of
Barnes & Noble, during the normal course of its
operations. The annual compensation paid by Barnes &
Noble to Leonard Riggio was allocated to the Company based upon
the amount of time Mr. Riggio devoted to the Company as
well as his duties and responsibilities. Management deemed the
allocation methodology to be reasonable. During the
52 weeks ended February 2, 2002, this allocated
compensation amounted to $0.3 million.

In July 2003, the Company purchased an airplane
from a company controlled by a member of the Board of Directors.
The purchase price was $9.5 million and was negotiated
through an independent third party following an independent
appraisal.

Recent Accounting Pronouncements

There were no recent accounting pronouncements
that had an effect on the Company.

Seasonality

Our business, like that of many retailers, is
seasonal, with the major portion of sales and operating profit
realized during the fourth quarter which includes the holiday
selling season. Results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal
year. Quarterly results may fluctuate materially depending upon,
among other factors, the timing of new product introductions and
new store openings, sales contributed by new stores, increases
or decreases in comparable store sales, adverse weather
conditions, shifts in the timing of certain holidays or
promotions and changes in our merchandise mix.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

Interest Rate Exposure

We do not use derivative financial instruments to
hedge interest rate exposure. We limit our interest rate risks
by investing our excess cash balances in short-term,
highly-liquid instruments with an original maturity of three
months or less. We do not expect any material losses from our
invested cash balances, and we believe that our interest rate
exposure is modest.

Foreign Exchange Exposure

We do not believe we have material foreign
currency exposure, because only a very immaterial portion of our
business is transacted in other than United States currency. The
Company historically has not entered into hedging transactions
with respect to its foreign currency, but may do so in the
future.

29



---



##### Table of Contents








|        |                                                             
|------- | ------------------------------------------------------------
|Item 8. | Consolidated Financial Statements and
    Supplementary Data

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






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

(a) Evaluation of Disclosure Controls and
Procedures

As of the end of the period covered by this
report, the Companys management conducted an evaluation,
under the supervision and with the participation of the
principal executive officer and principal financial officer, of
the Companys disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act). Based on this evaluation, the principal executive officer
and principal financial officer concluded that, as of the end of
the period covered by this report, the Companys disclosure
controls and procedures are effective. Notwithstanding the
foregoing, a control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance
that it will detect or uncover failures within the Company to
disclose material information otherwise required to be set forth
in the Companys periodic reports.

(b) Changes in Internal Controls

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




PART III






|         |                                                          
|-------- | ---------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant(*)

Code of Ethics

The Company has adopted a Code of Ethics that is
applicable to the Companys Chairman of the Board and Chief
Executive Officer, President, Chief Financial Officer, Vice
President-Finance and any Executive Vice President of the
Company. This Code of Ethics is attached as Exhibit 14.1 to
this Form 10-K.

In accordance with SEC rules, the Company intends
to disclose any amendment (other than any technical,
administrative, or other non-substantive amendment) to, or any
waiver from, a provision of the Code of Ethics on the
Companys website (www.gamestop.com) within five business
days following such amendment or waiver.






|         |                          
|-------- | -------------------------
|Item 11. | Executive Compensation(*)






|         |                                                                                                          
|-------- | ---------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters(*)






|         |                                                      
|-------- | -----------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions(*)






|         |                                              
|-------- | ---------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services(*)






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (*) | The information not otherwise provided herein
    that is required by Items 10, 11, 12, 13 and 14 will be set
    forth in the definitive proxy statement relating to the 2004
    Annual Meeting of Stockholders of the Company, which is to filed
    with the SEC pursuant to Regulation 14A under the
    Securities Exchange Act of 1934, as amended. This definitive
    proxy statement relates to a meeting of stockholders involving
    the election of directors and the portions therefrom required to
    be set forth in this Form 10-K by Items 10, 11, 12, 13
    and 14 are incorporated herein by reference pursuant to General
    Instruction G(3) to Form 10-K.

30



---



##### Table of Contents






PART IV






|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

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



| |                                                    
| | ---------------------------------------------------
| | (1) Index and Consolidated Financial
    Statements

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



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | (2) Financial Statement Schedules
    required to be filed by Item 8 of this form:

The following financial statement schedule for
the 52 weeks ended January 31, 2004, February 1,
2003 and February 2, 2002 is filed as part of this report
on Form 10-K and should be read in conjunction with our
Consolidated Financial Statements appearing elsewhere in this
Form 10-K:

Schedule II  Valuation and
Qualifying Accounts

For the 52 weeks ended January 31,
2004, February 1, 2003 and February 2, 2002:

|                                                |  |                |        |            |  |                  |        |            |  |            |        |  |  |   |        |  |  |   |        | 
|----------------------------------------------- |  | -------------- | ------ | ---------- |  | ---------------- | ------ | ---------- |  | ---------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                |  |                |        |            |  | Charged to Other |        |            |  |           
|                                                |  | Balance at     |        | Charged to |  | Accounts-        |        | Write-offs |  | Balance at
|                                                |  | Beginning      |        | Costs and  |  | Accounts         |        | Net of     |  | End of    
|                                                |  | of Period      |        | Expenses   |  | Payable          |        | Recoveries |  | Period    
|                                                |  |                |        |            |  |                  |        |            |  |           
|                                                |  |               
|                                                |  | (In thousands)
|Inventory Reserve, deducted from asset accounts |  |                |        |            |  |                  |        |            |  |            |        |  |  |   |        |  |  |   |        | 
|52 Weeks Ended January 31, 2004                 |  | $              | 11,797 |            |  | $                | 12,901 |            |  | $          | 10,899 |  |  | $ | 23,323 |  |  | $ | 12,274 | 
|52 Weeks Ended February 1, 2003                 |  |                | 10,400 |            |  |                  | 14,071 |            |  |            | 10,214 |  |  |   | 22,888 |  |  |   | 11,797 | 
|52 Weeks Ended February 2, 2002                 |  |                | 8,398  |            |  |                  | 16,578 |            |  |            | 7,878  |  |  |   | 22,454 |  |  |   | 10,400 | 

All other schedules are omitted because they are
not applicable.

(b) Reports on Form 8-K

On November 19, 2003, the Company furnished
a Form 8-K pursuant to Items 7 and 12 of such form
regarding a press release issued with earnings information for
the quarter ended November 1, 2003.

Subsequent to the end of fiscal 2003, the Company
furnished Form 8-Ks pursuant to Items 7 and 12 of such
form regarding press releases issued with earnings information
for the fiscal quarter and fiscal year ended January 31,
2004.

(c) Exhibits

The following exhibits are filed as part of this
Form 10-K:

|        |      |             |  |                                                                                                                
|------- | ---- | ----------- |  | ---------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 3.1  |             |  | Amended and Restated Certificate of
    Incorporation.(1)                                                      
|        | 3.2  |             |  | Bylaws.(1)                                                                                                     
|        | 10.1 |             |  | Separation Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(2)            
|        | 10.2 |             |  | Tax Disaffiliation Agreement, dated as of
    January 1, 2002, between Barnes & Noble and
    GameStop Corp.(1)
|        | 10.3 |             |  | Insurance Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(1)             
|        | 10.4 |             |  | Operating Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(1)             
|        | 10.5 |             |  | 2001 Incentive Plan.(2)                                                                                        

31



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##### Table of Contents



|        |       |             |  |                                                                                                                                                                                                                            
|------- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 10.6  |             |  | Lease, dated as of March 6, 1997, between
    RREEF Mid-Cities Industrial L.P. and Babbages Etc. LLC.(1)                                                                                                                  
|        | 10.7  |             |  | First Amendment to Lease, dated as of
    December 30, 1999, between RREEF Mid-Cities Industrial L.P.
    and Babbages Etc. LLC.(1)                                                                                       
|        | 10.8  |             |  | Registration Rights Agreement, dated as of
    January 1, 2002, between Barnes & Noble and
    GameStop Corp.(1)                                                                                                           
|        | 10.9  |             |  | Revolving Credit Agreement, dated as of
    February 19, 2002, among GameStop Corp., Fleet National
    Bank, as Administrative Agent, the Banks party thereto and Fleet
    Securities, Inc., as Arranger.(3)             
|        | 10.10 |             |  | Security Agreement, dated as of February 19,
    2002, by GameStop Corp. in favor of Fleet National Bank, as
    secured party and as Administrative Agent.(3)                                                             
|        | 10.11 |             |  | Subsidiary Guaranty, dated as of
    February 19, 2002, by and among GameStop, Inc.,
    Babbages Etc. LLC, Sunrise Publications, Inc. and
    GameStop.com, Inc. and Fleet National Bank, as Administrative
    Agent.(3)
|        | 10.12 |             |  | Securities Collateral Pledge Agreement, dated as
    of February 19, 2002, between GameStop Corp. and Fleet
    National Bank, as Administrative Agent.(3)                                                                 
|        | 10.13 |             |  | Patent and Trademark Securities Agreement, dated
    as of February 19, 2002, between GameStop Corp. and Fleet
    National Bank, as secured party and as Administrative Agent.(3)                                         
|        | 10.14 |             |  | Amendment to Revolving Credit Agreement, dated as
    of March 18, 2003.(4)                                                                                                                                                
|        | 10.15 |             |  | Amendment to Revolving Credit Agreement, dated as
    of June 3, 2003.(5)                                                                                                                                                  
|        | 14.1  |             |  | Code of Ethics for Senior Financial Officers.                                                                                                                                                                              
|        | 21.1  |             |  | Subsidiaries.                                                                                                                                                                                                              
|        | 23.1  |             |  | Consent of BDO Seidman, LLP                                                                                                                                                                                                
|        | 31.1  |             |  | Certification of Chief Executive Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.                           
|        | 31.2  |             |  | Certification of Chief Financial Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of
    1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                           
|        | 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.
|        | 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.



---



|    |                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the
    Registrants Amendment No. 3 to Form S-1 filed
    with the Securities and Exchange Commission on January 24,
    2002 (No. 333-68294).            
|   
|(2) | Incorporated by reference to the
    Registrants Amendment No. 4 to Form S-1 filed
    with the Securities and Exchange Commission on February 5,
    2002 (No. 333-68294).            
|   
|(3) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    May 4, 2002 filed with the Securities and Exchange
    Commission on June 13, 2002.        
|   
|(4) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    May 3, 2003 filed with the Securities and Exchange
    Commission on June 13, 2003.        
|   
|(5) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    August 2, 2003 filed with the Securities and Exchange
    Commission on September 12, 2003.

32



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##### Table of Contents






SIGNATURES

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



| |               
| | --------------
| | GAMESTOP CORP.



| |     |                                                                                               
| | --- | ----------------------------------------------------------------------------------------------
| | By: | /s/ R. RICHARD FONTAINE 
     ______________________________________ 
     R. Richard Fontaine

| |                          
| | -------------------------
| | Chairman of the Board and
| | Chief Executive Officer  

Date: April 14, 2004

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

|                                               |  |                                                                                                                                |  |                |  | 
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | -------------- |  | 
|                                               |  |                                                                                                                                |  |               
|Name                                           |  | Capacity                                                                                                                       |  | Date          
|                                               |  |                                                                                                                                |  |               
|                                              
|/s/ R. RICHARD FONTAINER. Richard Fontaine     |  | Chairman of the Board, Chief Executive Officer
    and Director (Principal Executive Officer)                                  |  | April 14, 2004
|                                              
|/s/ DAVID W. CARLSONDavid W. Carlson           |  | Executive Vice President, Chief Financial Officer
    and Assistant Secretary (Principal Accounting and Financial
    Officer) |  | April 14, 2004
|                                              
|/s/ DANIEL A. DEMATTEODaniel A. DeMatteo       |  | President and Chief Operating Officer and Director                                                                             |  | April 14, 2004
|                                              
|/s/ MICHAEL N. ROSENMichael N. Rosen           |  | Secretary and Director                                                                                                         |  | April 14, 2004
|                                              
|/s/ LEONARD RIGGIOLeonard Riggio               |  | Director                                                                                                                       |  | April 14, 2004
|                                              
|/s/ STEPHANIE M. SHERNStephanie M. Shern       |  | Director                                                                                                                       |  | April 14, 2004
|                                              
|/s/ EDWARD A. VOLKWEINEdward A. Volkwein       |  | Director                                                                                                                       |  | April 14, 2004
|                                              
|/s/ GERALD R. SZCZEPANSKIGerald R. Szczepanski |  | Director                                                                                                                       |  | April 14, 2004

33



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##### Table of Contents






INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                      |                                              |      |     |     | 
|----------------------------------------------------- | -------------------------------------------- | ---- | --- | --- | 
|                                                      |                                              | Page
|                                                      |                                              |     
|GameStop Corp. Consolidated Financial
    Statements: |                                              |      |     |    
|Report of Independent Certified Public Accountants    |                                              |      | F-2 |    
|Consolidated Financial Statements:                    |                                              |      |     |    
|                                                      | Balance Sheets                               |      |     | F-3 | 
|                                                      | Statements of Operations                     |      |     | F-4 | 
|                                                      | Statements of Stockholders Equity (Deficit) |      |     | F-5 | 
|                                                      | Statements of Cash Flows                     |      |     | F-6 | 
|                                                      | Notes to Consolidated Financial Statements   |      |     | F-7 | 

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Board of Directors and the Stockholders of

GameStop Corp.


Grapevine, Texas


We have audited the accompanying consolidated
balance sheets of GameStop Corp. as of January 31, 2004 and
February 1, 2003 and the related consolidated statements of
operations, stockholders equity (deficit), and cash flows
for the 52 weeks ended January 31, 2004,
February 1, 2003 and February 2, 2002. We have also
audited the schedule listed in Item 15(a)(2) of this
Form 10-K. These financial statements and the schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and the schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the
financial statements and schedule are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements and schedule. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of
the financial statements and schedule. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of GameStop Corp. as of
January 31, 2004 and February 1, 2003 and the results
of its operations and its cash flows for the 52 weeks ended
January 31, 2004, February 1, 2003 and February 2,
2002 in conformity with accounting principles generally accepted
in the United States of America.

Also, in our opinion, the schedule presents
fairly, in all material respects, the information set forth
therein.

As discussed in Note 2 to the consolidated
financial statements, effective February 2, 2003, GameStop
Corp. changed its method of accounting for consideration
received from a vendor.



| |                     
| | --------------------
| | /s/ BDO SEIDMAN, LLP
| |                     
| | BDO Seidman, LLP    

Dallas, Texas

March 12, 2004


F-2



---



##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED BALANCE SHEETS

|                                         |                                                                                                                          |                                            |         |             |         |  |         |         |         | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------- | ----------- | ------- |  | ------- | ------- | ------- | 
|                                         |                                                                                                                          | January 31,                                |         | February 1,
|                                         |                                                                                                                          | 2004                                       |         | 2003       
|                                         |                                                                                                                          |                                            |         |            
|                                         |                                                                                                                          |                                           
|                                         |                                                                                                                          | (In thousands)                            
|ASSETS                                  
|Current assets:                          |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         | Cash and cash equivalents                                                                                                |                                            | $       | 204,905     |         |  | $       | 232,030 |        
|                                         | Receivables, net                                                                                                         |                                            |         | 9,545       |         |  |         | 6,893   |        
|                                         | Merchandise inventories                                                                                                  |                                            |         | 223,526     |         |  |         | 161,369 |        
|                                         | Prepaid expenses and other current assets                                                                                |                                            |         | 14,340      |         |  |         | 10,127  |        
|                                         | Prepaid taxes                                                                                                            |                                            |         | 12,775      |         |  |         |        |        
|                                         | Deferred taxes                                                                                                           |                                            |         | 7,661       |         |  |         | 6,034   |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Total current assets                       |         |             | 472,752 |  |         |         | 416,453 | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|Property and equipment:                  |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         | Leasehold improvements                                                                                                   |                                            |         | 57,259      |         |  |         | 39,927  |        
|                                         | Fixtures and equipment                                                                                                   |                                            |         | 131,556     |         |  |         | 84,726  |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          |                                            | 188,815 |             |         |  | 124,653 |        
|                                         | Less accumulated depreciation and amortization                                                                           |                                            |         | 84,784      |         |  |         | 56,259  |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Net property and equipment                 |         |             | 104,031 |  |         |         | 68,394  | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|Goodwill, net                            |                                                                                                                          |                                            | 320,826 |             |         |  | 317,957 |        
|Other noncurrent assets                  |                                                                                                                          |                                            | 1,315   |             |         |  | 1,105   |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Total other assets                         |         |             | 322,141 |  |         |         | 319,062 | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Total assets                               |         | $           | 898,924 |  |         | $       | 803,909 | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         | Accounts payable                                                                                                         |                                            | $       | 204,011     |         |  | $       | 160,378 |        
|                                         | Accrued liabilities                                                                                                      |                                            |         | 79,839      |         |  |         | 65,779  |        
|                                         | Accrued income taxes payable                                                                                             |                                            |         |            |         |  |         | 15,814  |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Total current liabilities                  |         |             | 283,850 |  |         |         | 241,971 | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|Deferred taxes                           |                                                                                                                          |                                            | 17,731  |             |         |  | 10,391  |        
|Other long-term liabilities              |                                                                                                                          |                                            | 3,310   |             |         |  | 2,872   |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          |                                            | 21,041  |             |         |  | 13,263  |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Total liabilities                          |         |             | 304,891 |  |         |         | 255,234 | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|Stockholders equity :                   |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         | Preferred stock  authorized 5,000
    shares; no shares issued or outstanding                                           |                                            |         |            |         |  |         |        |        
|                                         | Class A common stock  $.001 par
    value; authorized 300,000 shares; 22,993 and 21,050 shares
    issued, respectively |                                            |         | 23          |         |  |         | 21      |        
|                                         | Class B common stock  $.001 par
    value; authorized 100,000 shares; 36,009 shares issued and
    outstanding          |                                            |         | 36          |         |  |         | 36      |        
|                                         | Additional paid-in-capital                                                                                               |                                            |         | 510,597     |         |  |         | 493,998 |        
|                                         | Accumulated other comprehensive income                                                                                   |                                            |         | 296         |         |  |         |        |        
|                                         | Retained earnings                                                                                                        |                                            |         | 118,087     |         |  |         | 54,620  |        
|                                         | Treasury stock, at cost, 2,304 and 0 shares,
    respectively                                                            |                                            |         | (35,006     | )       |  |         |        |        
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Total stockholders equity                 |         |             | 594,033 |  |         |         | 548,675 | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        
|                                         |                                                                                                                          | Total liabilities and stockholders equity |         | $           | 898,924 |  |         | $       | 803,909 | 
|                                         |                                                                                                                          |                                            |         |             |         |  |         |        

See accompanying notes to consolidated financial
statements.

F-3



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##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |         | 
|----------------------------------------------------- | ---------------------------------- | ------------------------------------- | --------- | ----------- |  | ----------- | --------- | ------- |  | - | --------- | ------- | 
|                                                      |                                    | 52 Weeks                              |           | 52 Weeks    |  | 52 Weeks   
|                                                      |                                    | Ended                                 |           | Ended       |  | Ended      
|                                                      |                                    | January 31,                           |           | February 1, |  | February 2,
|                                                      |                                    | 2004                                  |           | 2003        |  | 2002       
|                                                      |                                    |                                       |           |             |  |            
|                                                      |                                    |                                      
|                                                      |                                    | (In thousands, except per share data)
|Sales                                                 |                                    | $                                     | 1,578,838 |             |  | $           | 1,352,791 |         |  | $ | 1,121,138 |        
|Cost of sales                                         |                                    |                                       | 1,142,264 |             |  |             | 1,009,491 |         |  |   | 854,035   |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Gross profit                       |                                       |           | 436,574     |  |             |           | 343,300 |  |   |           | 267,103 | 
|Selling, general and administrative expenses          |                                    |                                       | 303,243   |             |  |             | 233,676   |         |  |   | 202,719   |        
|Depreciation and amortization                         |                                    |                                       | 28,947    |             |  |             | 22,553    |         |  |   | 19,172    |        
|Amortization of goodwill                              |                                    |                                       |          |             |  |             |          |         |  |   | 11,125    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Operating earnings                 |                                       |           | 104,384     |  |             |           | 87,071  |  |   |           | 34,087  | 
|Interest income                                       |                                    |                                       | (1,467    | )           |  |             | (1,998    | )       |  |   | (123      | )      
|Interest expense                                      |                                    |                                       | 663       |             |  |             | 1,368     |         |  |   | 19,575    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Earnings before income tax expense |                                       |           | 105,188     |  |             |           | 87,701  |  |   |           | 14,635  | 
|Income tax expense                                    |                                    |                                       | 41,721    |             |  |             | 35,297    |         |  |   | 7,675     |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Net earnings                       |                                       | $         | 63,467      |  |             | $         | 52,404  |  |   | $         | 6,960   | 
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Net earnings per common share  basic                 |                                    | $                                     | 1.13      |             |  | $           | 0.93      |         |  | $ | 0.19      |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Weighted average shares of common
    stock  basic   |                                    |                                       | 56,330    |             |  |             | 56,289    |         |  |   | 36,009    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Net earnings per common share  diluted               |                                    | $                                     | 1.06      |             |  | $           | 0.87      |         |  | $ | 0.18      |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Weighted average shares of common
    stock  diluted |                                    |                                       | 59,764    |             |  |             | 60,419    |         |  |   | 39,397    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        

See accompanying notes to consolidated financial
statements.

F-4



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##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)

|                                                                         |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |       |         |   |  |   |     |  |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------ |  | -------------- | ------ | ---------- |  | ------------- | -- | -------- |  | -------- | ------ | ------ |  | --------- | -- | ----- |  | ----- | ------- | - |  | - | --- |  |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                         |  |                |        |            |  | Accumulated   |    |          |  |          |        |       
|                                                                         |  | Common Stock   |        | Additional |  | Other         |    | Retained |  |          |        |       
|                                                                         |  |                |        | Paid in    |  | Comprehensive |    | Earnings |  | Treasury |        |       
|                                                                         |  | Shares         |        | Class A    |  | Shares        |    | Class B  |  | Capital  |        | Income |  | (Deficit) |    | Stock |  | Total
|                                                                         |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |      
|                                                                         |  |               
|                                                                         |  | (In thousands)
|Balance at February 3, 2001                                              |  |                |       |            |  | $             |   |          |  |          | 36,009 |        |  | $         | 36 |       |  | $     | (15,902 | ) |  | $ |    |  |  | $ | (4,744  | ) |  | $ |        |   |  | $ | (20,610 | )
|Additional acquisition payments due to former
    owners                 |  |                |       |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       | 9,665   |   |  |   |    |  |  |   |        |   |  |   |        |   |  |   | 9,665   |  
|Net earnings for the 52 weeks ended February
    2, 2002                 |  |                |       |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       |        |   |  |   |    |  |  |   | 6,960   |   |  |   |        |   |  |   | 6,960   |  
|                                                                         |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |       |         |   |  |   |     |  |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at February 2, 2002                                              |  |                |       |            |  |               |   |          |  |          | 36,009 |        |  |           | 36 |       |  |       | (6,237  | ) |  |   |    |  |  |   | 2,216   |   |  |   |        |   |  |   | (3,985  | )
|Shares issued in public offering                                         |  |                | 20,764 |            |  |               | 21 |          |  |          |       |        |  |           |   |       |  |       | 347,318 |   |  |   |    |  |  |   |        |   |  |   |        |   |  |   | 347,339 |  
|Exercise of employee stock options (including tax
    benefit of $1,906) |  |                | 286    |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       | 2,917   |   |  |   |    |  |  |   |        |   |  |   |        |   |  |   | 2,917   |  
|Capital contribution from Barnes & Noble,
    Inc.                       |  |                |       |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       | 150,000 |   |  |   |    |  |  |   |        |   |  |   |        |   |  |   | 150,000 |  
|Net earnings for the 52 weeks ended February
    1, 2003                 |  |                |       |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       |        |   |  |   |    |  |  |   | 52,404  |   |  |   |        |   |  |   | 52,404  |  
|                                                                         |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |       |         |   |  |   |     |  |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at February 1, 2003                                              |  |                | 21,050 |            |  |               | 21 |          |  |          | 36,009 |        |  |           | 36 |       |  |       | 493,998 |   |  |   |    |  |  |   | 54,620  |   |  |   |        |   |  |   | 548,675 |  
|Comprehensive income:                                                    |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |       |         |   |  |   |     |  |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings for the 52 weeks ended January
    31, 2004                 |  |                |       |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       |        |   |  |   |    |  |  |   | 63,467  |   |  |   |        |   |  |   |         |  
|Foreign currency translation                                             |  |                |       |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       |        |   |  |   | 296 |  |  |   |        |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                               |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |       |         |   |  |   |     |  |  |   |         |   |  |   |         |   |  |   | 63,763  |  
|Exercise of employee stock options (including tax
    benefit of $9,702) |  |                | 1,943  |            |  |               | 2  |          |  |          |       |        |  |           |   |       |  |       | 16,599  |   |  |   |    |  |  |   |        |   |  |   |        |   |  |   | 16,601  |  
|Treasury stock acquired, 2,304 shares                                    |  |                |       |            |  |               |   |          |  |          |       |        |  |           |   |       |  |       |        |   |  |   |    |  |  |   |        |   |  |   | (35,006 | ) |  |   | (35,006 | )
|                                                                         |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |       |         |   |  |   |     |  |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at January 31, 2004                                              |  |                | 22,993 |            |  | $             | 23 |          |  |          | 36,009 |        |  | $         | 36 |       |  | $     | 510,597 |   |  | $ | 296 |  |  | $ | 118,087 |   |  | $ | (35,006 | ) |  | $ | 594,033 |  
|                                                                         |  |                |        |            |  |               |    |          |  |          |        |        |  |           |    |       |  |       |         |   |  |   |     |  |  |   |         |   |  |   |         |   |  |   |         |  

See accompanying notes to consolidated financial
statements.

F-5



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##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |         |        |         |  
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------- | ------ | ----------- | ------- | -------- | ------ | ------- | ------ | ------- | ------ | ------- | -
|                                                 |                                                                                               | 52 Weeks                                                                                     |                                                                            | 52 Weeks    |        | 52 Weeks   
|                                                 |                                                                                               | Ended                                                                                        |                                                                            | Ended       |        | Ended      
|                                                 |                                                                                               | January 31,                                                                                  |                                                                            | February 1, |        | February 2,
|                                                 |                                                                                               | 2004                                                                                         |                                                                            | 2003        |        | 2002       
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |            
|                                                 |                                                                                               |                                                                                             
|                                                 |                                                                                               | (In thousands)                                                                              
|Cash flows from operating activities:            |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 | Net earnings                                                                                  |                                                                                              | $                                                                          | 63,467      |        |             | $       | 52,404   |        |         | $      | 6,960   |       
|                                                 | Adjustments to reconcile net earnings to net cash
    flows provided by operating activities: |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |         |       
|                                                 |                                                                                               | Depreciation and amortization                                                                |                                                                            |             | 28,947 |             |         |          | 22,553 |         |        |         | 19,172 |        
|                                                 |                                                                                               | Amortization of goodwill                                                                     |                                                                            |             |       |             |         |          |       |         |        |         | 11,125 |        
|                                                 |                                                                                               | Amortization of loan cost                                                                    |                                                                            |             | 313    |             |         |          | 242    |         |        |         |       |        
|                                                 |                                                                                               | Deferred taxes                                                                               |                                                                            |             | 5,713  |             |         |          | 4,710  |         |        |         | 319    |        
|                                                 |                                                                                               | Tax benefit realized from exercise of stock
    options by employees                         |                                                                            |             | 9,702  |             |         |          | 1,906  |         |        |         |       |        
|                                                 |                                                                                               | Loss on disposal of property and equipment                                                   |                                                                            |             | 213    |             |         |          | 205    |         |        |         | 1,035  |        
|                                                 |                                                                                               | Increase in other long-term liabilities for
    scheduled rent increases in long-term leases |                                                                            |             | 338    |             |         |          | 329    |         |        |         | 347    |        
|                                                 |                                                                                               | Minority interest                                                                            |                                                                            |             | (298   | )           |         |          |       |         |        |         |       |        
|                                                 |                                                                                               | Changes in operating assets and liabilities, net                                             |                                                                            |             |        |             |         |          |        |         |        |         |        |        
|                                                 |                                                                                               |                                                                                              | Receivables, net                                                           |             |        | (1,954      | )       |          |        | (963    | )      |         |        | (2,204  | )
|                                                 |                                                                                               |                                                                                              | Merchandise inventories                                                    |             |        | (59,811     | )       |          |        | (23,018 | )      |         |        | (29,498 | )
|                                                 |                                                                                               |                                                                                              | Prepaid expenses and other current assets                                  |             |        | (4,111      | )       |          |        | (1,872  | )      |         |        | 5,427   |  
|                                                 |                                                                                               |                                                                                              | Prepaid taxes                                                              |             |        | (12,775     | )       |          |        |        |        |         |        |        |  
|                                                 |                                                                                               |                                                                                              | Accounts payable, accrued liabilities and accrued
    income taxes payable |             |        | 40,056      |         |          |        | 36,374  |        |         |        | 65,436  |  
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 |                                                                                               |                                                                                              | Net cash flows provided by operating activities                            |             |        | 69,800      |         |          |        | 92,870  |        |         |        | 78,119  |  
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|Cash flows from investing activities:            |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 | Purchase of property and equipment                                                            |                                                                                              |                                                                            | (63,007     | )      |             |         | (39,529  | )      |         |        | (20,462 | )     
|                                                 | Acquisition of controlling interest in Gamesworld
    Group Limited, net of cash received     |                                                                                              |                                                                            | (3,027      | )      |             |         |         |        |         |        |        |       
|                                                 | Net increase in other noncurrent assets                                                       |                                                                                              |                                                                            | (522        | )      |             |         | (788     | )      |         |        | (23     | )     
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 | Net cash flows used in investing activities                                                   |                                                                                              |                                                                            | (66,556     | )      |             |         | (40,317  | )      |         |        | (20,485 | )     
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|Cash flows from financing activities:            |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 | Issuance of 20,764 shares relating to the public
    offering, net of the related expenses    |                                                                                              |                                                                            |            |        |             |         | 347,339  |        |         |        |        |       
|                                                 | Issuance of shares relating to employee stock
    options                                     |                                                                                              |                                                                            | 6,899       |        |             |         | 1,011    |        |         |        |        |       
|                                                 | Repayment of debt due to Barnes & Noble, Inc.                                                 |                                                                                              |                                                                            |            |        |             |         | (250,000 | )      |         |        |        |       
|                                                 | Repayment of debt of Gamesworld Group Limited                                                 |                                                                                              |                                                                            | (2,296      | )      |             |         |         |        |         |        |        |       
|                                                 | Purchase of treasury shares through repurchase
    program                                    |                                                                                              |                                                                            | (35,006     | )      |             |         |         |        |         |        |        |       
|                                                 | Net increase in other payable to Barnes &
    Noble, Inc.                                     |                                                                                              |                                                                            |            |        |             |         | 377      |        |         |        | 14,475  |       
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 | Net cash flows (used in) provided by financing
    activities                                 |                                                                                              |                                                                            | (30,403     | )      |             |         | 98,727   |        |         |        | 14,475  |       
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 | Exchange rate effect on cash and cash equivalents                                             |                                                                                              |                                                                            | 34          |        |             |         |         |        |         |        |        |       
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|                                                 | Net increase (decrease) in cash and cash
    equivalents                                      |                                                                                              |                                                                            | (27,125     | )      |             |         | 151,280  |        |         |        | 72,109  |       
|Cash and cash equivalents at beginning of period |                                                                                               |                                                                                              | 232,030                                                                    |             |        |             | 80,750  |          |        |         | 8,641  |        
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        
|Cash and cash equivalents at end of period       |                                                                                               | $                                                                                            | 204,905                                                                    |             |        | $           | 232,030 |          |        | $       | 80,750 |        
|                                                 |                                                                                               |                                                                                              |                                                                            |             |        |             |         |          |        |         |        |        

See accompanying notes to consolidated financial
statements.

F-6



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##### Table of Contents



GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

1.     Summary of
Significant Accounting Policies

Background
and Basis of Presentation

GameStop Corp. (GameStop or the
Company) was incorporated under the laws of the
State of Delaware in August 2001 as a holding company for
GameStop, Inc. GameStop is a majority-owned subsidiary of
Barnes & Noble, Inc. (Barnes & Noble).

GameStop, which began operations within its
wholly-owned subsidiary, Babbages Etc. LLC
(Babbages) in November 1996, is
principally engaged in the sale of new and used video game
systems and software, personal computer entertainment software
and related accessories primarily through its GameStop trade
name, a web site (gamestop.com) and Game Informermagazine. The Company operates its business as a single
segment. The Companys stores, which totaled 1,514 at
January 31, 2004, are located in major regional shopping
malls and strip centers in 49 states, the District of Columbia,
Ireland, Puerto Rico and Guam.

During June 2000, Barnes & Noble
acquired Funco, Inc. (Funco), a publicly traded
company on the NASDAQ National Market and, thereafter, through a
corporate restructuring, Babbages became a wholly-owned
subsidiary of Funco. In December 2000, the name of Funco
was changed to GameStop, Inc.

In February 2002, the Company completed a public
offering of 20,764 shares of Class A common stock at
$18.00 per share (the Offering). The net proceeds of
the Offering, after deducting applicable issuance costs and
expenses, were $347,339. A portion of the net proceeds was used
to repay $250,000 of intercompany debt owed to Barnes &
Noble. Additionally, upon the effective date of the Offering,
Barnes & Noble made a capital contribution of $150,000 for
the remaining balance of the intercompany debt.

Upon the effective date of the Offering, the
Companys Board of Directors approved the authorization of
5,000 shares of preferred stock, 300,000 shares of Class A
common stock and 100,000 shares of Class B common stock. At
the same time, the Companys common stock outstanding was
converted to 36,009 shares of Class B common stock. The
consolidated financial statements and related net earnings per
common share reflect the authorized number of shares as if the
shares were authorized on February 4, 2001.

Consolidation

The consolidated financial statements include the
accounts of GameStop and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. All dollar and share amounts in the
consolidated financial statements and notes to the consolidated
financial statements are stated in thousands unless otherwise
indicated.

Year-End

The Companys fiscal year is composed of the
52 or 53 weeks ending on the Saturday closest to the last
day of January. Fiscal 2003 consisted of the 52 weeks
ending on January 31, 2004. Fiscal 2002 consisted of the
52 weeks ending on February 1, 2003. Fiscal 2001
consisted of the 52 weeks ending on February 2, 2002.

Cash and Cash
Equivalents

The Company considers all short-term,
highly-liquid instruments purchased with an original maturity of
three months or less to be cash equivalents. The Companys
cash and cash equivalents are carried at cost, which
approximates market value, and consist primarily of time
deposits and money market investment accounts.

F-7



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Merchandise
Inventories

Our merchandise inventories are carried at the
lower of cost or market using the average cost method. Used
video game products traded in by customers are recorded as
inventory at the amount of the store credit given to the
customer. In valuing inventory, management is required to make
assumptions regarding the necessity of reserves required to
value potentially obsolete or over-valued items at the lower of
cost or market. Management considers quantities on hand, recent
sales, potential price protections and returns to vendors, among
other factors, when making these assumptions.

Property and
Equipment

Property and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over estimated useful
lives (ranging from two to eight years). Maintenance and repairs
are expensed as incurred, while betterments and major remodeling
costs are capitalized. Leasehold improvements are capitalized
and amortized over the shorter of their estimated useful lives
or the terms of the respective leases (generally ranging from
three to ten years). Capitalized lease acquisition costs are
being amortized over the average lease terms of the underlying
leases. Costs incurred in purchasing management information
systems are capitalized and included in property and equipment;
these costs are amortized over their estimated useful lives from
the date the systems become operational.

The Company periodically reviews its property and
equipment when events or changes in circumstances indicate that
their carrying amounts may not be recoverable or their
depreciation or amortization periods should be accelerated. The
Company assesses recoverability based on several factors,
including managements intention with respect to its stores
and those stores projected undiscounted cash flows. An
impairment loss would be recognized for the amount by which the
carrying amount of the assets exceeds the present value of their
projected cash flows. No write-downs have been necessary through
January 31, 2004.

Goodwill

Goodwill, aggregating $339,991, was recorded in
the acquisition of Funco and through the application of
push-down accounting in accordance with Securities
and Exchange Commission Staff Accounting Bulletin No. 54
(SAB 54) in connection with the acquisition of
Babbages by a subsidiary of Barnes & Noble. Goodwill
in the amount of $2,869 was recorded in the acquisition of
Gamesworld Group Limited in June 2003. Goodwill represents
the excess purchase price over tangible net assets acquired.

Effective February 3, 2002, the Company
adopted the provisions of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142). SFAS 142
requires, among other things, that companies no longer amortize
goodwill, but instead evaluate goodwill for impairment on at
least an annual basis.

In accordance with the requirements of
SFAS 142, the Company completed the initial impairment test
of the goodwill attributable to its reporting unit as of
February 3, 2002, and concluded that none of its goodwill
was impaired. As part of this analysis, the Company determined
that it has one reporting unit based upon the similar economic
characteristics of its operations. Fair value of this reporting
unit was estimated using market capitalization methodologies.
The Company also evaluates the goodwill of its reporting unit
for impairment at least annually, which the Company has elected
to perform during the fourth quarter of each fiscal year. For
fiscal 2003 and 2002, the Company determined that none of its
goodwill was impaired. Note 6 provides additional information
concerning goodwill.

Prior to the adoption of the provisions of
SFAS 142, the Companys goodwill was amortized on a
straight-line basis over a 30-year period. At February 2,
2002, accumulated amortization was $22,034.

F-8



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Revenue
Recognition

Revenue from the sales of the Companys
products is recognized at the time of sale. The sales of used
video game products are recorded at the retail price charged to
the customer. Sales returns (which are not significant) are
recognized at the time returns are made.

Subscription and advertising revenues are
recorded upon release of magazines for sale to consumers and are
stated net of sales discounts. Magazine subscription revenue is
recognized on a straight-line basis over the subscription period.

Pre-Opening
Expenses

All costs associated with the opening of new
stores are expensed as incurred. Pre-opening expenses are
included in selling, general and administrative expenses in the
accompanying consolidated statements of operations.

Closed Store
Expenses

Upon a formal decision to close or relocate a
store, the Company charges unrecoverable costs to expense. Such
costs include the net book value of abandoned fixtures and
leasehold improvements and a provision for future lease
obligations, net of expected sublease recoveries. Costs
associated with store closings are included in selling, general
and administrative expenses in the accompanying consolidated
statements of operations.

Advertising
Expenses

The Company expenses advertising costs for
newspapers and other media when the advertising takes place.
Advertising expenses for newspapers and other media during the
52 weeks ended January 31, 2004, February 1, 2003
and February 2, 2002, were $7,044, $4,258 and $838,
respectively.

Income
Taxes

Following the closing of the Offering, Barnes
& Noble owned less than 80% of GameStop and, accordingly, is
no longer permitted to consolidate GameStops operations
for income tax purposes. Accordingly, the financial statements
reflect income tax expense as if GameStop had filed separate
income tax returns as a C corporation on a
stand-alone basis. As a result, the Company accounts for income
taxes in accordance with the provisions of Statement of
Financial Accounting Standards No. 109 Accounting for
Income Taxes (SFAS 109). SFAS 109
utilizes an asset and liability approach, and deferred taxes are
determined based on the estimated future tax effect of
differences between the financial reporting and tax bases of
assets and liabilities using enacted tax rates.

For the periods prior to the Offering, GameStop
was included in the consolidated federal tax return of Barnes
& Noble. The income tax provisions recorded in the financial
statements for these periods flowed through the payable to
Barnes & Noble.

Foreign
Currency Translation

Gamestop has determined that the functional
currency of its foreign subsidiary is the subsidiarys
local currency (the EURO). The assets and liabilities of the
subsidiary are translated at the applicable exchange rate as of
the end of the balance sheet date and revenue and expenses are
translated at an average rate over the period. Currency
translation adjustments are recorded as a component of other
comprehensive income.

F-9



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Net Earnings
Per Common Share

Net earnings per common share is presented in
accordance with Statement of Financial Accounting Standards
No. 128, Earnings Per Share
(SFAS 128). Basic earnings per common share is
computed using the weighted average number of common shares
outstanding during the period and excludes any dilutive effects
of the Companys outstanding options.

Diluted earnings per common share is computed
using the weighted average number of common and dilutive common
shares outstanding during the period. Note 4 provides
additional information regarding net earnings per common share.

Stock
Options

Statement of Financial Accounting Standards
No. 123, Accounting for Stock Based
Compensation, (SFAS 123) encourages but
does not require companies to record compensation cost for stock
based employee compensation plans at fair value. As permitted
under Statement of Financial Accounting Standards No. 148,
Accounting for Stock Based Compensation 
Transition and Disclosure, (SFAS 148)
which amended SFAS 123, the Company has elected to continue
to account for stock based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess,
if any, of the quoted market price of the Companys stock
at the date of the grant over the amount an employee must pay to
acquire the stock. Note 13 provides additional information
regarding the Companys stock option plan.

The following table illustrates the effect on net
earnings and net earnings per common share if the Company had
applied the fair value recognition provisions of SFAS 123
to stock based employee compensation for the options granted
under its plans:

|                                                                                                                                                     |  |                                       |        |             |  |             |        |  |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------ | -
|                                                                                                                                                     |  | 52 Weeks                              |        | 52 Weeks    |  | 52 Weeks   
|                                                                                                                                                     |  | Ended                                 |        | Ended       |  | Ended      
|                                                                                                                                                     |  | January 31,                           |        | February 1, |  | February 2,
|                                                                                                                                                     |  | 2004                                  |        | 2003        |  | 2002       
|                                                                                                                                                     |  |                                       |        |             |  |            
|                                                                                                                                                     |  |                                      
|                                                                                                                                                     |  | (In thousands, except per share data)
|Net earnings, as reported                                                                                                                            |  | $                                     | 63,467 |             |  | $           | 52,404 |  |  | $ | 6,960  |  
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects* |  |                                       | 7,888  |             |  |             | 8,287  |  |  |   | 9,016  |  
|                                                                                                                                                     |  |                                       |        |             |  |             |        |  |  |   |        |  
|Pro forma net earnings (loss)                                                                                                                        |  | $                                     | 55,579 |             |  | $           | 44,117 |  |  | $ | (2,056 | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |  |  |   |        |  
|Net earnings per common share  basic,
    as reported                                                                                               |  | $                                     | 1.13   |             |  | $           | 0.93   |  |  | $ | 0.19   |  
|                                                                                                                                                     |  |                                       |        |             |  |             |        |  |  |   |        |  
|Net earnings (loss) per common
    share  basic, pro forma                                                                                          |  | $                                     | 0.99   |             |  | $           | 0.78   |  |  | $ | (0.06  | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |  |  |   |        |  
|Net earnings per common share 
    diluted, as reported                                                                                             |  | $                                     | 1.06   |             |  | $           | 0.87   |  |  | $ | 0.18   |  
|                                                                                                                                                     |  |                                       |        |             |  |             |        |  |  |   |        |  
|Net earnings (loss) per common
    share  diluted, pro forma                                                                                        |  | $                                     | 0.93   |             |  | $           | 0.73   |  |  | $ | (0.06  | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |  |  |   |        |  



---



|  |                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Amounts include compensation expense associated
    with options to acquire approximately 350 shares of Barnes &
    Noble which were issued to GameStop employees in January 2000
    pursuant to the Barnes & Noble stock option plan.

F-10



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The weighted-average fair value of the options
granted during the 52 weeks ended January 31, 2004,
February 1, 2003 and February 2, 2002 were estimated
at $5.30, $8.08 and $2.75, respectively, using the Black-Scholes
option pricing model with the following assumptions:

|                        |  |             |      |             |  |             |      |   |  |  |      |  
|----------------------- |  | ----------- | ---- | ----------- |  | ----------- | ---- | - |  |  | ---- | -
|                        |  | 52 Weeks    |      | 52 Weeks    |  | 52 Weeks   
|                        |  | Ended       |      | Ended       |  | Ended      
|                        |  | January 31, |      | February 1, |  | February 2,
|                        |  | 2004        |      | 2003        |  | 2002       
|                        |  |             |      |             |  |            
|Volatility              |  |             | 61.6 | %           |  |             | 61.9 | % |  |  | 61.1 | %
|Risk-free interest rate |  |             | 3.19 | %           |  |             | 4.60 | % |  |  | 4.97 | %
|Expected life (years)   |  |             | 6.0  |             |  |             | 6.0  |   |  |  | 6.0  |  
|Expected dividend yield |  |             | 0    | %           |  |             | 0    | % |  |  | 0    | %

Use of
Estimates

The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. In preparing these
financial statements, management has made its best estimates and
judgments of certain amounts included in the financial
statements, giving due consideration to materiality. Changes in
the estimates and assumptions used by management could have
significant impact on the Companys financial results.
Actual results could differ from those estimates.

Fair Values
of Financial Instruments

The carrying values of cash and cash equivalents
reported in the accompanying consolidated balance sheets
approximate fair value due to the short-term maturities of these
assets.

Recently
Issued Accounting Pronouncements

There were no recent accounting pronouncements
that had an effect on the Company.

Reclassifications

Certain reclassifications have been made to
conform the prior period data to the current year presentation.

2.     Effect of
Accounting Change (Unaudited)

In November 2002, the FASB Emerging Issues Task
Force (Task Force) issued EITF Issue 02-16,
Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor,
(EITF 02-16). EITF 02-16 addresses the
following two issues: (i) the classification in a
resellers financial statements of cash consideration
received from a vendor (Issue 1); and
(ii) the timing of recognition by a reseller of a rebate or
refund from a vendor that is contingent upon achieving a
specific cumulative level of purchases or remaining a customer
for a specified time period (Issue 2).
Issue 1 stipulates that cash consideration received from a
vendor is presumed to be a reduction of the prices of the
vendors products and should, therefore, be recognized as a
reduction of cost of merchandise sold when recognized in the
resellers financial statements. However, that presumption
is overcome when the consideration is either (a) a payment
for assets or services delivered to the vendor, in which case
the cash consideration should be recognized as revenue (or other
income, as appropriate) when recognized in the resellers
income statement, or (b) a reimbursement of a specific,
incremental, identifiable cost incurred by the reseller in
selling the vendors

F-11



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

products, in which case the cash consideration
should be characterized as a reduction of that cost when
recognized in the resellers income statement. Issue 2
states that vendor rebates should be recognized on a systematic
and rational allocation of the cash consideration offered to
each of the underlying transactions that results in progress by
the reseller toward earning the rebate, provided the amounts are
probable and reasonably estimable. Issue 1 is effective
prospectively for all new arrangements, including modifications
of existing arrangements, entered into after December 31,
2002. Issue 2 is effective prospectively for all new
arrangements initiated after November 21, 2002.

The Company and its vendors participate in
cooperative advertising programs and other vendor marketing
programs in which the vendors provide the Company with cash
consideration in exchange for marketing and advertising the
vendors products. The change of our accounting for
cooperative advertising arrangements and other vendor marketing
programs resulted in a portion of the consideration received
from our vendors reducing the product costs in inventory rather
than as an offset to our marketing and advertising costs as in
prior years. The consideration serving as a reduction in
inventory will be recognized in cost of sales as inventory is
sold. The amount of vendor allowances to be recorded as a
reduction of inventory was determined by calculating the ratio
of vendor allowances in excess of specific, incremental and
identifiable advertising and promotional costs to merchandise
purchases. The Company then applied this ratio to the value of
inventory in determining the amount of vendor reimbursements to
be recorded as a reduction to inventory reflected on the balance
sheet.

The impact of the new accounting method decreased
our cost of sales for the 52 weeks ended January 31,
2004 by $21,569 and increased selling, general and
administrative expenses by $26,779. The impact to cost of sales
reflects the reclassification of the cooperative advertising
credit, as well as $5,210 deferred as a reduction in inventory.
Prior periods have not been restated. However, the following
table presents the 52 weeks ended January 31, 2004,
February 1, 2003 and February 2, 2002 on a pro forma
basis as if EITF 02-16 had been implemented prior to the
beginning of fiscal 2001:

|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |         | 
|----------------------------------------------------- | ---------------------------------- | ------------------------------------- | --------- | ----------- |  | ----------- | --------- | ------- |  | - | --------- | ------- | 
|                                                      |                                    | 52 Weeks                              |           | 52 Weeks    |  | 52 Weeks   
|                                                      |                                    | Ended                                 |           | Ended       |  | Ended      
|                                                      |                                    | January 31,                           |           | February 1, |  | February 2,
|                                                      |                                    | 2004                                  |           | 2003        |  | 2002       
|                                                      |                                    |                                       |           |             |  |            
|                                                      |                                    |                                      
|                                                      |                                    | (In thousands, except per share data)
|Sales                                                 |                                    | $                                     | 1,578,838 |             |  | $           | 1,352,791 |         |  | $ | 1,121,138 |        
|Cost of sales                                         |                                    |                                       | 1,138,596 |             |  |             | 984,530   |         |  |   | 833,748   |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Gross profit                       |                                       |           | 440,242     |  |             |           | 368,261 |  |   |           | 287,390 | 
|Selling, general and administrative expenses          |                                    |                                       | 303,243   |             |  |             | 258,972   |         |  |   | 223,315   |        
|Depreciation and amortization                         |                                    |                                       | 28,947    |             |  |             | 22,553    |         |  |   | 19,172    |        
|Amortization of goodwill                              |                                    |                                       |          |             |  |             |          |         |  |   | 11,125    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Operating earnings                 |                                       |           | 108,052     |  |             |           | 86,736  |  |   |           | 33,778  | 
|Interest income                                       |                                    |                                       | (1,467    | )           |  |             | (1,998    | )       |  |   | (123      | )      
|Interest expense                                      |                                    |                                       | 663       |             |  |             | 1,368     |         |  |   | 19,575    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Earnings before income tax expense |                                       |           | 108,856     |  |             |           | 87,366  |  |   |           | 14,326  | 
|Income tax expense                                    |                                    |                                       | 43,108    |             |  |             | 35,160    |         |  |   | 7,513     |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|                                                      | Net earnings                       |                                       | $         | 65,748      |  |             | $         | 52,206  |  |   | $         | 6,813   | 
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Net earnings per common share  basic                 |                                    | $                                     | 1.17      |             |  | $           | 0.93      |         |  | $ | 0.19      |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Weighted average shares of common
    stock  basic   |                                    |                                       | 56,330    |             |  |             | 56,289    |         |  |   | 36,009    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Net earnings per common share  diluted               |                                    | $                                     | 1.10      |             |  | $           | 0.86      |         |  | $ | 0.17      |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        
|Weighted average shares of common
    stock  diluted |                                    |                                       | 59,764    |             |  |             | 60,419    |         |  |   | 39,397    |        
|                                                      |                                    |                                       |           |             |  |             |           |         |  |   |           |        

F-12



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

3.     Acquisitions

On June 23, 2003, the Company acquired a
controlling interest in Gamesworld Group Limited
(Gamesworld), an Ireland-based electronic games
retailer, for approximately $3,279. The acquisition was
accounted for using the purchase method of accounting and,
accordingly, the results of operations for the period subsequent
to the acquisition are included in the consolidated financial
statements. The excess of purchase price over the net assets
acquired, in the amount of approximately $2,869, has been
recorded as goodwill. The pro forma effect assuming the
acquisition of Gamesworld at the beginning of fiscal 2001,
fiscal 2002 and fiscal 2003 is not material.

4.     Computation of
Net Earnings per Common Share

A reconciliation of shares used in calculating
basic and diluted net earnings per common share follows:

|                                                             |  |                                       |        |             |  |             |        |  |  |   |        | 
|------------------------------------------------------------ |  | ------------------------------------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------ | 
|                                                             |  | 52 Weeks                              |        | 52 Weeks    |  | 52 Weeks   
|                                                             |  | Ended                                 |        | Ended       |  | Ended      
|                                                             |  | January 31,                           |        | February 1, |  | February 2,
|                                                             |  | 2004                                  |        | 2003        |  | 2002       
|                                                             |  |                                       |        |             |  |            
|                                                             |  |                                      
|                                                             |  | (In thousands, except per share data)
|Net earnings                                                 |  | $                                     | 63,467 |             |  | $           | 52,404 |  |  | $ | 6,960  | 
|                                                             |  |                                       |        |             |  |             |        |  |  |   |        | 
|Weighted Common Shares Outstanding                           |  |                                       | 56,330 |             |  |             | 56,289 |  |  |   | 36,009 | 
|Common Share Equivalents Related to Options and
    Warrants |  |                                       | 3,434  |             |  |             | 4,130  |  |  |   | 3,388  | 
|                                                             |  |                                       |        |             |  |             |        |  |  |   |        | 
|Common Shares and Common Share Equivalents                   |  |                                       | 59,764 |             |  |             | 60,419 |  |  |   | 39,397 | 
|                                                             |  |                                       |        |             |  |             |        |  |  |   |        | 
|Net Earnings per Common Share:                               |  |                                       |        |             |  |             |        |  |  |   |        | 
|Basic                                                        |  | $                                     | 1.13   |             |  | $           | 0.93   |  |  | $ | 0.19   | 
|                                                             |  |                                       |        |             |  |             |        |  |  |   |        | 
|Diluted                                                      |  | $                                     | 1.06   |             |  | $           | 0.87   |  |  | $ | 0.18   | 
|                                                             |  |                                       |        |             |  |             |        |  |  |   |        | 

Options to purchase approximately 3,831 shares of
common stock at exercise prices ranging from $18.00 to
$21.25 per share were outstanding during a portion of
fiscal 2003, but were not included in the computation of
diluted earnings per share because they were anti-dilutive.
These options expire through 2013.

5.     Receivables,
Net

Receivables represent primarily bankcard and
other receivables as follows:

|                                |  |                |       |             |  |   |       |  
|------------------------------- |  | -------------- | ----- | ----------- |  | - | ----- | -
|                                |  | January 31,    |       | February 1,
|                                |  | 2004           |       | 2003       
|                                |  |                |       |            
|                                |  |               
|                                |  | (In thousands)
|Bankcard receivables            |  | $              | 5,147 |             |  | $ | 4,461 |  
|Other receivables               |  |                | 4,787 |             |  |   | 2,673 |  
|Allowance for doubtful accounts |  |                | (389  | )           |  |   | (241  | )
|                                |  |                |       |             |  |   |       |  
|Total receivables, net          |  | $              | 9,545 |             |  | $ | 6,893 |  
|                                |  |                |       |             |  |   |       |  

F-13



---



##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

6.     Goodwill

The Company adopted the transitional disclosures
of SFAS 142 effective February 3, 2002 (see
Note 1). The changes in the carrying amount of goodwill for
the Companys business segment for the 52 weeks ended
January 31, 2004 and February 1, 2003 were as follows:

|                                                             |  |                |         | 
|------------------------------------------------------------ |  | -------------- | ------- | 
|                                                             |  | Goodwill      
|                                                             |  |               
|                                                             |  | (In thousands)
|Balance at February 2, 2002                                  |  | $              | 317,957 | 
|Amortization for the 52 weeks ended
    February 1, 2003     |  |                |        | 
|                                                             |  |                |         | 
|Balance at February 1, 2003                                  |  |                | 317,957 | 
|Addition for the acquisition of Gamesworld Group
    Limited |  |                | 2,869   | 
|Amortization for the 52 weeks ended
    January 31, 2004     |  |                |        | 
|                                                             |  |                |         | 
|Balance at January 31, 2004                                  |  | $              | 320,826 | 
|                                                             |  |                |         | 

The effects of the adoption of SFAS 142 on
the reported net earnings and net earnings per common share for
the 52 weeks ended January 31, 2004, February 1,
2003 and February 2, 2002 are as follows:

|                                              |  |                                       |        |             |  |             |        |  |  |   |        | 
|--------------------------------------------- |  | ------------------------------------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------ | 
|                                              |  | 52 Weeks                              |        | 52 Weeks    |  | 52 Weeks   
|                                              |  | Ended                                 |        | Ended       |  | Ended      
|                                              |  | January 31,                           |        | February 1, |  | February 2,
|                                              |  | 2004                                  |        | 2003        |  | 2002       
|                                              |  |                                       |        |             |  |            
|                                              |  |                                      
|                                              |  | (In thousands, except per share data)
|Reported net earnings                         |  | $                                     | 63,467 |             |  | $           | 52,404 |  |  | $ | 6,960  | 
|Add Back: Goodwill amortization, net of taxes |  |                                       |       |             |  |             |       |  |  |   | 8,413  | 
|                                              |  |                                       |        |             |  |             |        |  |  |   |        | 
|Net earnings, as adjusted                     |  | $                                     | 63,467 |             |  | $           | 52,404 |  |  | $ | 15,373 | 
|                                              |  |                                       |        |             |  |             |        |  |  |   |        | 
|Earnings per share  basic:                   |  |                                       |        |             |  |             |        |  |  |   |        | 
|Reported net earnings                         |  | $                                     | 1.13   |             |  | $           | 0.93   |  |  | $ | 0.19   | 
|Goodwill amortization, net of taxes           |  |                                       |       |             |  |             |       |  |  |   | 0.23   | 
|                                              |  |                                       |        |             |  |             |        |  |  |   |        | 
|Adjusted net earnings                         |  | $                                     | 1.13   |             |  | $           | 0.93   |  |  | $ | 0.42   | 
|                                              |  |                                       |        |             |  |             |        |  |  |   |        | 
|Earnings per share  diluted:                 |  |                                       |        |             |  |             |        |  |  |   |        | 
|Reported net earnings                         |  | $                                     | 1.06   |             |  | $           | 0.87   |  |  | $ | 0.18   | 
|Goodwill amortization, net of taxes           |  |                                       |       |             |  |             |       |  |  |   | 0.21   | 
|                                              |  |                                       |        |             |  |             |        |  |  |   |        | 
|Adjusted net earnings                         |  | $                                     | 1.06   |             |  | $           | 0.87   |  |  | $ | 0.39   | 
|                                              |  |                                       |        |             |  |             |        |  |  |   |        | 

7.     Debt

Concurrent with the Offering, the Company entered
into a $75,000 senior secured revolving credit facility which
expires in February 2005. The revolving credit facility is
governed by an eligible inventory borrowing base agreement,
defined as 50% of non-defective inventory. Loans incurred under
the credit facility will be maintained from time to time, at the
Companys option, as (1) base rate loans which bear
interest at the base rate (defined in the credit facility as the
higher of (a) the administrative agents announced
base rate or (b)  1/2 of 1% in excess of the federal
funds effective rate, each as in effect from time to time) or
(2) London Interbank Office Rate (LIBOR) loans
bearing interest at the LIBOR rate for the applicable interest
period, in each case plus an applicable interest margin. In
addition, the Company is required to pay a commitment fee of
0.375% for any unused amounts of the revolving credit facility.
Any borrowings under the revolving credit facility are secured
by the assets of the Company. The revolving credit facility
generally restricts our ability to

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GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

pay dividends and requires the Company to
maintain certain financial ratios. There have been no borrowings
under the revolving credit facility.

8.     Comprehensive
Income

Comprehensive income is net earnings, plus
certain other items that are recorded directly to
stockholders equity and consists of the following:

|                            |                                          |                |        |             |  |             |        |   |  |   |       |   | 
|--------------------------- | ---------------------------------------- | -------------- | ------ | ----------- |  | ----------- | ------ | - |  | - | ----- | - | 
|                            |                                          | 52 Weeks       |        | 52 Weeks    |  | 52 Weeks   
|                            |                                          | Ended          |        | Ended       |  | Ended      
|                            |                                          | January 31,    |        | February 1, |  | February 2,
|                            |                                          | 2004           |        | 2003        |  | 2002       
|                            |                                          |                |        |             |  |            
|                            |                                          |               
|                            |                                          | (In thousands)
|Net earnings                |                                          | $              | 63,467 |             |  | $           | 52,404 |   |  | $ | 6,960 |  
|Other comprehensive income: |                                          |                |        |             |  |             |        |   |  |   |       |  
|                            | Foreign currency translation adjustments |                |        | 296         |  |             |        |  |  |   |       |  | 
|                            |                                          |                |        |             |  |             |        |   |  |   |       |  
|Total comprehensive income  |                                          | $              | 63,763 |             |  | $           | 52,404 |   |  | $ | 6,960 |  
|                            |                                          |                |        |             |  |             |        |   |  |   |       |  

9.     Payable to
Barnes & Noble

On November 18, 1997, Barnes & Noble
obtained an $850,000, five-year senior revolving credit facility
(the Revolving Credit Facility) with a syndicate led
by the Chase Manhattan Bank. Amounts available under the
Revolving Credit Facility were used to fund the acquisitions of
Funco and Babbages described in Note 1, and Barnes &
Noble has allocated such debt to the Company and charged the
Company interest of $825 and $19,575 relating to this debt for
the 52 weeks ended February 1, 2003 and
February 2, 2002, respectively. A portion of the net
proceeds of the Offering was used to repay $250,000 of
intercompany debt owed to Barnes & Noble. Additionally, upon
the effective date of the Offering, Barnes & Noble made a
capital contribution of the $150,000 remaining balance of the
intercompany debt.

In fiscal 2002, Barnes & Noble entered into a
$500,000 three-year senior revolving credit facility with a
syndicate of banks led by Fleet National Bank as administrative
agent. This facility replaced the $850,000 facility led by Chase
Manhattan Bank. The Companys Class B common stock,
which is owned entirely by Barnes & Noble, is pledged as
collateral on the $500,000 facility.

10.     Leases

The Company leases retail stores, warehouse
facilities, office space and equipment. These are generally
leased under noncancelable agreements that expire at various
dates through 2034 with various renewal options for additional
periods. The agreements, which have been classified as operating
leases, generally provide for both minimum and percentage
rentals and require the Company to pay all insurance, taxes and
other maintenance costs. Percentage rentals are based on sales
performance in excess of specified minimums at various stores.

Approximate rental expenses under operating
leases are as follows:

|                   |  |                |        |             |  |             |        |  |  |   |        | 
|------------------ |  | -------------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------ | 
|                   |  | 52 Weeks       |        | 52 Weeks    |  | 52 Weeks   
|                   |  | Ended          |        | Ended       |  | Ended      
|                   |  | January 31,    |        | February 1, |  | February 2,
|                   |  | 2004           |        | 2003        |  | 2002       
|                   |  |                |        |             |  |            
|                   |  |               
|                   |  | (In thousands)
|Minimum            |  | $              | 58,016 |             |  | $           | 47,316 |  |  | $ | 42,110 | 
|Percentage rentals |  |                | 7,418  |             |  |             | 10,704 |  |  |   | 10,436 | 
|                   |  |                |        |             |  |             |        |  |  |   |        | 
|                   |  | $              | 65,434 |             |  | $           | 58,020 |  |  | $ | 52,546 | 
|                   |  |                |        |             |  |             |        |  |  |   |        | 

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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Future minimum annual rentals, excluding
percentage rentals, required under leases that had initial,
noncancelable lease terms greater than one year, as of
January 31, 2004 are approximately:

|             |  |                |         | 
|------------ |  | -------------- | ------- | 
|Year Ended   |  | Amount        
|             |  |               
|             |  | (In thousands)
|January 2005 |  | $              | 59,455  | 
|January 2006 |  |                | 50,970  | 
|January 2007 |  |                | 43,018  | 
|January 2008 |  |                | 35,946  | 
|January 2009 |  |                | 25,694  | 
|Thereafter   |  |                | 57,188  | 
|             |  |                |         | 
|             |  | $              | 272,271 | 
|             |  |                |         | 

11.     Litigation

On May 29, 2003, former Store Manager Carlos
Moreira (Plaintiff) filed a class action lawsuit
against the Company and its wholly-owned subsidiary
Gamestop, Inc. (collectively GameStop) in Los
Angeles County Superior Court alleging that GameStops
salaried retail managers were misclassified as exempt and should
have been paid overtime. Plaintiff is seeking to represent a
class of current and former salaried retail managers who were
employed by GameStop in California at anytime between
May 29, 1999 and the present. Plaintiff has alleged claims
for violation of California Labor Code sections 203, 226
and 1194 and California Business and Professions Code section
17200. Plaintiff is seeking recovery of unpaid overtime,
interest, penalties, attorneys fees and costs. During
court-ordered mediation in March 2004, the parties reached
a settlement in principle which, if approved by the court, would
define the class of current and former salaried retail managers
and would result in an immaterial cost to the Company.
Management expects that the settlement and resolution of this
case will take place in fiscal 2004.

In the ordinary course of our business, the
Company is, from time to time, subject to various other legal
proceedings. Management does not believe that any such other
legal proceedings, individually or in the aggregate, will have a
material adverse effect on the Companys operations or
financial condition.

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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

12.     Income
Taxes

The provision for income tax consisted of the
following:

|                                                                                             |         |                |        |             |   |             |        |        |  |   |       |       | 
|-------------------------------------------------------------------------------------------- | ------- | -------------- | ------ | ----------- | - | ----------- | ------ | ------ |  | - | ----- | ----- | 
|                                                                                             |         | 52 Weeks       |        | 52 Weeks    |   | 52 Weeks   
|                                                                                             |         | Ended          |        | Ended       |   | Ended      
|                                                                                             |         | January 31,    |        | February 1, |   | February 2,
|                                                                                             |         | 2004           |        | 2003        |   | 2002       
|                                                                                             |         |                |        |             |   |            
|                                                                                             |         |               
|                                                                                             |         | (In thousands)
|Current tax expense (benefit):                                                               |         |                |        |             |   |             |        |        |  |   |       |      
|                                                                                             | Federal |                | $      | 21,671      |   |             | $      | 22,945 |  |   | $     | 5,892 | 
|                                                                                             | State   |                |        | 4,733       |   |             |        | 5,736  |  |   |       | 1,464 | 
|                                                                                             | Foreign |                |        | (98         | ) |             |        |       |  |   |       |      | 
|                                                                                             |         |                |        |             |   |             |        |        |  |   |       |      
|                                                                                             |         |                | 26,306 |             |   |             | 28,681 |        |  |   | 7,356 |      
|                                                                                             |         |                |        |             |   |             |        |        |  |   |       |      
|Deferred tax expense (benefit):                                                              |         |                |        |             |   |             |        |        |  |   |       |      
|                                                                                             | Federal |                |        | 4,690       |   |             |        | 3,768  |  |   |       | 256   | 
|                                                                                             | State   |                |        | 1,023       |   |             |        | 942    |  |   |       | 63    | 
|                                                                                             |         |                |        |             |   |             |        |        |  |   |       |      
|                                                                                             |         |                | 5,713  |             |   |             | 4,710  |        |  |   | 319   |      
|                                                                                             |         |                |        |             |   |             |        |        |  |   |       |      
|Charge in lieu of income taxes, relating to the
    tax effect of stock option tax deduction |         |                | 9,702  |             |   |             | 1,906  |        |  |   |      |      
|                                                                                             |         |                |        |             |   |             |        |        |  |   |       |      
|Total income tax expense                                                                     |         | $              | 41,721 |             |   | $           | 35,297 |        |  | $ | 7,675 |      
|                                                                                             |         |                |        |             |   |             |        |        |  |   |       |      

The difference in income tax provided and the
amounts determined by applying the statutory rate to income
before income taxes result from the following:

|                                          |  |             |      |             |  |             |      |   |  |  |      |  
|----------------------------------------- |  | ----------- | ---- | ----------- |  | ----------- | ---- | - |  |  | ---- | -
|                                          |  | 52 Weeks    |      | 52 Weeks    |  | 52 Weeks   
|                                          |  | Ended       |      | Ended       |  | Ended      
|                                          |  | January 31, |      | February 1, |  | February 2,
|                                          |  | 2004        |      | 2003        |  | 2002       
|                                          |  |             |      |             |  |            
|Federal statutory tax rate                |  |             | 35.0 | %           |  |             | 35.0 | % |  |  | 35.0 | %
|State income taxes, net of federal effect |  |             | 4.6  |             |  |             | 5.2  |   |  |  | 6.8  |  
|Non-deductible goodwill amortization      |  |             | 0.0  |             |  |             | 0.0  |   |  |  | 10.5 |  
|Foreign income taxes                      |  |             | (0.1 | )           |  |             | 0.0  |   |  |  | 0.0  |  
|Other (including permanent differences)   |  |             | 0.2  |             |  |             | 0.0  |   |  |  | 0.1  |  
|                                          |  |             |      |             |  |             |      |   |  |  |      |  
|                                          |  |             | 39.7 | %           |  |             | 40.2 | % |  |  | 52.4 | %
|                                          |  |             |      |             |  |             |      |   |  |  |      |  

Differences between financial accounting
principles and tax laws cause differences between the bases of
certain assets and liabilities for financial reporting purposes
and tax purposes. The tax effects of these

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GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

differences, to the extent they are temporary,
are recorded as deferred tax assets and liabilities under
SFAS 109 and consisted of the following components:

|                    |                                      |                                |   |             |         |   |   |         |         |  
|------------------- | ------------------------------------ | ------------------------------ | - | ----------- | ------- | - | - | ------- | ------- | -
|                    |                                      | January 31,                    |   | February 1,
|                    |                                      | 2004                           |   | 2003       
|                    |                                      |                                |   |            
|                    |                                      |                               
|                    |                                      | (In thousands)                
|Deferred tax asset: |                                      |                                |   |             |         |   |   |        
|                    | Allowance for doubtful accounts      |                                | $ | 62          |         |   | $ | 102     |        
|                    | Inventory capitalization costs       |                                |   | 1,694       |         |   |   | 1,064   |        
|                    | Inventory obsolescence reserve       |                                |   | 4,200       |         |   |   | 3,251   |        
|                    | Accrued liabilities                  |                                |   | 273         |         |   |   | 878     |        
|                    | Gift certificate liability           |                                |   | 1,912       |         |   |   | 536     |        
|                    | Deferred rents                       |                                |   | 1,353       |         |   |   | 1,209   |        
|                    | Accrued state taxes                  |                                |   | (480        | )       |   |   | 404     |        
|                    |                                      |                                |   |             |         |   |   |        
|                    |                                      | Total deferred tax benefits    |   |             | 9,014   |   |   |         | 7,444   |  
|                    |                                      |                                |   |             |         |   |   |        
|                    | Deferred tax liabilities:            |                                |   |             |         |   |   |         |        
|                    | Goodwill                             |                                |   | (15,814     | )       |   |   | (10,521 | )      
|                    | Translation adjustment               |                                |   | (200        | )       |   |   |        |        
|                    | Fixed assets                         |                                |   | (4,170      | )       |   |   | (1,614  | )      
|                    | Accrued state taxes                  |                                |   | 1,100       |         |   |   | 334     |        
|                    |                                      |                                |   |             |         |   |   |        
|                    |                                      | Total deferred tax liabilities |   |             | (19,084 | ) |   |         | (11,801 | )
|                    |                                      |                                |   |             |         |   |   |        
|                    |                                      | Net                            |   | $           | (10,070 | ) |   | $       | (4,357  | )
|                    |                                      |                                |   |             |         |   |   |        
|                    | Financial statements:                |                                |   |             |         |   |   |         |        
|                    | Current deferred tax assets          |                                | $ | 7,661       |         |   | $ | 6,034   |        
|                    |                                      |                                |   |             |         |   |   |        
|                    | Non-current deferred tax liabilities |                                | $ | (17,731     | )       |   | $ | (10,391 | )      
|                    |                                      |                                |   |             |         |   |   |        

13.     Stock Option
Plan

Effective August 2001, Barnes & Noble
approved the 2001 Incentive Plan of GameStop Corp. The 2001
Incentive Plan assumed (by the issuance of replacement options)
all stock options outstanding as of the effective date under the
2000 Incentive Plan of GameStop, Inc. under the same terms.

Effective September 13, 2000, Barnes &
Noble approved the 2000 Incentive Plan of
GameStop, Inc. (together with the 2001 Incentive Plan
of Gamestop Corp, the Option Plans). The Option
Plans, as amended, provide a maximum aggregate amount of 20,000
shares of common stock with respect to which options may be
granted and provide for the granting of incentive stock options,
non-qualified stock options, and restricted stock, which may
include, without limitation, restrictions on the right to vote
such shares and restrictions on the right to receive dividends
on such shares. The options to purchase common shares generally
are issued at fair market value on the date of grant. Generally,
the options vest and become exercisable ratably over a
three-year period, commencing one year after the grant date, and
expire ten years from issuance.

Option Plan
Grants

On December 5, 2000, the Company granted
4,488 options to its employees based upon the fair value of the
shares at the date of grant ($3.53 per share) as determined
by an independent appraisal. On June 13, 2001, options to
acquire 4,500 shares were granted with immediate vesting at an
exercise price of $4.51 per share to Leonard Riggio based
on the fair value at the date of grant as determined by an
independent appraisal. On

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GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

February 12, 2002, the Company granted 4,500
options to its employees at an exercise price of $18.00 per
share (the per share offering price).

A summary of the status of the Companys
stock options is presented below:

|                          |  |            |        |                  |  |   |       | 
|------------------------- |  | ---------- | ------ | ---------------- |  | - | ----- | 
|                          |  |            |        | Weighted-Average
|                          |  | Shares     |        | Exercise Price  
|                          |  |            |        |                 
|                          |  | (Thousands |        |                 
|                          |  | of shares) |        |                 
|Balance, February 3, 2001 |  |            | 4,470  |                  |  | $ | 3.53  | 
|Granted                   |  |            | 4,500  |                  |  | $ | 4.51  | 
|Exercised                 |  |            |       |                  |  | $ |      | 
|Forfeited                 |  |            | (159   | )                |  | $ | 3.53  | 
|                          |  |            |        |                  |  |   |       | 
|Balance, February 2, 2002 |  |            | 8,811  |                  |  | $ | 4.03  | 
|Granted                   |  |            | 4,545  |                  |  | $ | 18.02 | 
|Exercised                 |  |            | (287   | )                |  | $ | 3.53  | 
|Forfeited                 |  |            | (309   | )                |  | $ | 12.10 | 
|                          |  |            |        |                  |  |   |       | 
|Balance, February 1, 2003 |  |            | 12,760 |                  |  | $ | 8.83  | 
|                          |  |            |        |                  |  |   |       | 
|Granted                   |  |            | 1,119  |                  |  | $ | 12.19 | 
|Exercised                 |  |            | (1,943 | )                |  | $ | 3.55  | 
|Forfeited                 |  |            | (629   | )                |  | $ | 16.55 | 
|                          |  |            |        |                  |  |   |       | 
|Balance, January 31, 2004 |  |            | 11,307 |                  |  | $ | 9.63  | 
|                          |  |            |        |                  |  |   |       | 

The following table summarizes information as of
January 31, 2004 concerning outstanding and exercisable
options:

|                         |  |                     |        |                     |  |             |      |             |  |           |       |  |  |  |       |  |  |   |       | 
|------------------------ |  | ------------------- | ------ | ------------------- |  | ----------- | ---- | ----------- |  | --------- | ----- |  |  |  | ----- |  |  | - | ----- | 
|                         |  |                     |        |                    
|                         |  | Options Outstanding |        | Options Exercisable
|                         |  |                     |        |                    
|                         |  |                     |        | Weighted-           |  | Weighted-   |      |             |  | Weighted-
|                         |  | Number              |        | Average             |  | Average     |      | Number      |  | Average  
|                         |  | Outstanding         |        | Remaining           |  | Contractual |      | Exercisable |  | Exercise 
|Range of Exercise Prices |  | (000s)              |        | Life                |  | Price       |      | (000s)      |  | Price    
|                         |  |                     |        |                     |  |             |      |             |  |          
|$ 3.53  $ 4.51          |  |                     | 6,436  |                     |  |             | 7.21 |             |  | $         | 4.21  |  |  |  | 6,436 |  |  | $ | 4.21  | 
|$11.80  $12.71          |  |                     | 925    |                     |  |             | 9.17 |             |  | $         | 11.90 |  |  |  |      |  |  | $ | 11.90 | 
|$15.25  $16.48          |  |                     | 115    |                     |  |             | 9.60 |             |  | $         | 15.41 |  |  |  | 5     |  |  | $ | 15.41 | 
|$18.00  $21.25          |  |                     | 3,831  |                     |  |             | 8.31 |             |  | $         | 18.03 |  |  |  | 1,355 |  |  | $ | 18.03 | 
|                         |  |                     |        |                     |  |             |      |             |  |           |       |  |  |  |       |  |  |   |       | 
|$ 3.53  $21.25          |  |                     | 11,307 |                     |  |             | 7.68 |             |  | $         | 9.63  |  |  |  | 7,796 |  |  | $ | 6.62  | 
|                         |  |                     |        |                     |  |             |      |             |  |           |       |  |  |  |       |  |  |   |       | 

During the 13 weeks ended January 29,
2000, options to acquire approximately 350 shares of Barnes
& Noble were issued to GameStop employees pursuant to the
Barnes & Noble stock option plan. Such grants were made at
the fair market value of Barnes & Noble common stock at the
date of grant.

14.     Employees
Defined Contribution Plan

The Company sponsors a defined contribution plan
(the Savings Plan) for the benefit of substantially
all of its employees who meet certain eligibility requirements,
primarily age and length of service. The Savings Plan allows
employees to invest up to 15% of their current gross cash
compensation invested on a pre-tax basis, at their option. The
Companys optional contributions to the Savings Plan are
generally in amounts based upon a certain percentage of the
employees contributions. The Companys contributions
to the Savings Plan

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GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

during the 52 weeks ended January 31,
2004, February 1, 2003 and February 2, 2002, were
$849, $715 and $660, respectively.

15.     Certain
Relationships and Related Transactions

The Company operates departments within ten
bookstores operated by Barnes & Noble. The Company pays a
license fee to Barnes & Noble in amounts equal to 7.0% of
the gross sales of such departments. Management deems the
license fee to be reasonable and based upon terms equivalent to
those that would prevail in an arms length transaction.
During the 52 weeks ended January 31, 2004,
February 1, 2003 and February 2, 2002, these charges
amounted to $974, $1,103 and $1,098, respectively.

The Company participates in Barnes &
Nobles workers compensation, property and general
liability insurance programs. The costs incurred by Barnes &
Noble under these programs are allocated to the Company based
upon the Companys total payroll expense, property and
equipment, and insurance claim history. Management deems the
allocation methodology to be reasonable. During the
52 weeks ended January 31, 2004, February 1, 2003
and February 2, 2002, these allocated charges amounted to
$2,363, $1,726 and $1,291, respectively.

Prior to the completion of the Offering, the
Company utilized the management and strategic advisory services
of Leonard Riggio, the Chairman of Barnes & Noble, during
the normal course of its operations. The annual compensation
paid by Barnes & Noble to Leonard Riggio was allocated to
the Company based upon the amount of time Mr. Riggio
devoted to the Company as well as his duties and
responsibilities. Management deemed the allocation methodology
to be reasonable. During the 52 weeks ended
February 2, 2002, this allocated compensation amounted to
$325.

In July 2003, the Company purchased an airplane
from a company controlled by a member of the Board of Directors.
The purchase price was $9,500 and was negotiated through an
independent third party following an independent appraisal.

16.     Supplemental
Cash Flow Information

|                                 |                                                                     |                |       |             |  |             |   |         |  |   |   |        |  
|-------------------------------- | ------------------------------------------------------------------- | -------------- | ----- | ----------- |  | ----------- | - | ------- |  | - | - | ------ | -
|                                 |                                                                     | 52 Weeks       |       | 52 Weeks    |  | 52 Weeks   
|                                 |                                                                     | Ended          |       | Ended       |  | Ended      
|                                 |                                                                     | January 31,    |       | February 1, |  | February 2,
|                                 |                                                                     | 2004           |       | 2003        |  | 2002       
|                                 |                                                                     |                |       |             |  |            
|                                 |                                                                     |               
|                                 |                                                                     | (In thousands)
|Cash paid during the period for: |                                                                     |                |       |             |  |             |   |         |  |   |   |       
|                                 | Interest                                                            |                | $     | 308         |  |             | $ | 47,236  |  |   | $ |       |  
|                                 |                                                                     |                |       |             |  |             |   |         |  |   |   |       
|                                 | Income taxes                                                        |                |       | 56,555      |  |             |   | 14,641  |  |   |   |       |  
|                                 |                                                                     |                |       |             |  |             |   |         |  |   |   |       
|Subsidiaries acquired:           |                                                                     |                |       |             |  |             |   |         |  |   |   |       
|                                 | Goodwill                                                            |                |       | 2,869       |  |             |   |        |  |   | $ | 9,665  |  
|                                 | Accrual of additional acquisition payments due to
    former owners |                |       |            |  |             |   |        |  |   |   | (9,665 | )
|                                 | Cash received in acquisition                                        |                |       | 252         |  |             |   |        |  |   |   |       |  
|                                 | Net assets acquired (or liabilities assumed)                        |                |       | 158         |  |             |   |        |  |   |   |       |  
|                                 |                                                                     |                |       |             |  |             |   |         |  |   |   |       
|Cash paid                        |                                                                     | $              | 3,279 |             |  | $           |  |         |  | $ |  |       
|                                 |                                                                     |                |       |             |  |             |   |         |  |   |   |       
|Non-cash financing activity:     |                                                                     |                |       |             |  |             |   |         |  |   |   |       
|                                 | Barnes & Noble capital contribution                                 |                | $     |            |  |             | $ | 150,000 |  |   | $ |       |  
|                                 |                                                                     |                |       |             |  |             |   |         |  |   |   |       

F-20



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

17.     Repurchase of
Equity Securities

In March 2003, the Board of Directors authorized
a common stock repurchase program for the purchase of up to
$50,000 of the Companys Class A common shares. The
Company may repurchase shares from time to time in the open
market or through privately negotiated transactions, depending
on prevailing market conditions and other factors. The
repurchased shares will be held in treasury. During the
52 weeks ended January 31, 2004, the Company
repurchased 2,304 shares at an average share price of
$15.19.

18.     Subsequent
Events

In March 2004, the Company purchased a
420 square foot facility in Grapevine, Texas. The Company
will be relocating certain of our distribution operations to
this facility in fiscal 2004 and will be relocating our
headquarters and remaining distribution center operations to
this facility in early 2005. The Company expects that the total
cost to purchase, improve and equip this facility will be
approximately $29,000. Management believes this facility will
support our long-term growth.

19.     Unaudited
Quarterly Financial Information

The following table sets forth certain unaudited
quarterly consolidated statement of operations information for
the fiscal years ended January 31, 2004 and
February 1, 2003. The unaudited quarterly information
includes all normal recurring adjustments that management
considers necessary for a fair presentation of the information
shown.

|                                        |  |                                    |         |                                    |  |         |         |         |  |         |         |         |  |         |         |         |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         | 
|--------------------------------------- |  | ---------------------------------- | ------- | ---------------------------------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- |  |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                        |  |                                    |         |                                   
|                                        |  | Fiscal Year Ended January 31, 2004 |         | Fiscal Year Ended February 1, 2003
|                                        |  |                                    |         |                                   
|                                        |  | 1st                                |         | 2nd                                |  | 3rd     |         | 4th     |  | 1st     |         | 2nd     |  | 3rd     |         | 4th    
|                                        |  | Quarter                            |         | Quarter                            |  | Quarter |         | Quarter |  | Quarter |         | Quarter |  | Quarter |         | Quarter
|                                        |  |                                    |         |                                    |  |         |         |         |  |         |         |         |  |         |         |        
|                                        |  |                                   
|                                        |  | (In thousands)                    
|Sales                                   |  | $                                  | 321,741 |                                    |  | $       | 305,674 |         |  | $       | 326,042 |         |  | $       | 625,381 |         |  | $ | 271,405 |  |  | $ | 274,262 |  |  | $ | 286,728 |  |  | $ | 520,396 | 
|Gross profit                            |  |                                    | 85,441  |                                    |  |         | 88,983  |         |  |         | 98,474  |         |  |         | 163,676 |         |  |   | 69,091  |  |  |   | 73,445  |  |  |   | 73,845  |  |  |   | 126,919 | 
|Operating earnings                      |  |                                    | 10,689  |                                    |  |         | 10,849  |         |  |         | 17,891  |         |  |         | 64,955  |         |  |   | 8,714   |  |  |   | 9,863   |  |  |   | 15,982  |  |  |   | 52,512  | 
|Net earnings                            |  |                                    | 6,611   |                                    |  |         | 6,606   |         |  |         | 10,693  |         |  |         | 39,557  |         |  |   | 4,914   |  |  |   | 6,118   |  |  |   | 9,785   |  |  |   | 31,587  | 
|Net earnings per common share  basic   |  |                                    | 0.12    |                                    |  |         | 0.12    |         |  |         | 0.19    |         |  |         | 0.71    |         |  |   | 0.09    |  |  |   | 0.11    |  |  |   | 0.17    |  |  |   | 0.55    | 
|Net earnings per common share  diluted |  |                                    | 0.11    |                                    |  |         | 0.11    |         |  |         | 0.18    |         |  |         | 0.67    |         |  |   | 0.08    |  |  |   | 0.10    |  |  |   | 0.16    |  |  |   | 0.52    | 

F-21



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##### Table of Contents



EXHIBIT INDEX

|        |       |             |  |                                                                                                                                                                                                                            
|------- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 3.1   |             |  | Amended and Restated Certificate of
    Incorporation.(1)                                                                                                                                                                  
|        | 3.2   |             |  | Bylaws.(1)                                                                                                                                                                                                                 
|        | 10.1  |             |  | Separation Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(2)                                                                                                                        
|        | 10.2  |             |  | Tax Disaffiliation Agreement, dated as of January
    1, 2002, between Barnes & Noble and GameStop Corp.(1)                                                                                                                
|        | 10.3  |             |  | Insurance Agreement, dated as of January 1, 2002,
    between Barnes & Noble and GameStop Corp.(1)                                                                                                                         
|        | 10.4  |             |  | Operating Agreement, dated as of January 1, 2002,
    between Barnes & Noble and GameStop Corp.(1)                                                                                                                         
|        | 10.5  |             |  | 2001 Incentive Plan.(2)                                                                                                                                                                                                    
|        | 10.6  |             |  | Lease, dated as of March 6, 1997, between RREEF
    Mid-Cities Industrial L.P. and Babbages Etc. LLC.(1)                                                                                                                  
|        | 10.7  |             |  | First Amendment to Lease, dated as of December
    30, 1999, between RREEF Mid-Cities Industrial L.P. and
    Babbages Etc. LLC.(1)                                                                                       
|        | 10.8  |             |  | Registration Rights Agreement, dated as of
    January 1, 2002, between Barnes & Noble and GameStop Corp.(1)                                                                                                               
|        | 10.9  |             |  | Revolving Credit Agreement, dated as of February
    19, 2002, among GameStop Corp., Fleet National Bank, as
    Administrative Agent, the Banks party thereto and Fleet
    Securities, Inc., as Arranger.(3)             
|        | 10.10 |             |  | Security Agreement, dated as of February 19,
    2002, by GameStop Corp. in favor of Fleet National Bank, as
    secured party and as Administrative Agent.(3)                                                             
|        | 10.11 |             |  | Subsidiary Guaranty, dated as of February 19,
    2002, by and among GameStop, Inc., Babbages Etc. LLC,
    Sunrise Publications, Inc. and GameStop.com, Inc. and Fleet
    National Bank, as Administrative Agent.(3)    
|        | 10.12 |             |  | Securities Collateral Pledge Agreement, dated as
    of February 19, 2002, between GameStop Corp. and Fleet National
    Bank, as Administrative Agent.(3)                                                                 
|        | 10.13 |             |  | Patent and Trademark Securities Agreement, dated
    as of February 19, 2002, between GameStop Corp. and Fleet
    National Bank, as secured party and as Administrative Agent.(3)                                         
|        | 10.14 |             |  | Amendment to Revolving Credit Agreement, dated as
    of March 18, 2003.(4)                                                                                                                                                
|        | 10.15 |             |  | Amendment to Revolving Credit Agreement, dated as
    of June 3, 2003.(5)                                                                                                                                                  
|        | 14.1  |             |  | Code of Ethics for Senior Financial Officers.                                                                                                                                                                              
|        | 21.1  |             |  | Subsidiaries.                                                                                                                                                                                                              
|        | 23.1  |             |  | Consent of BDO Seidman, LLP.                                                                                                                                                                                               
|        | 31.1  |             |  | Certification of Chief Executive Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002.                           
|        | 31.2  |             |  | Certification of Chief Financial Officer pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002.                           
|        | 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.
|        | 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.






|    |                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the
    Registrants Amendment No. 3 to Form S-1 filed
    with the Securities and Exchange Commission on January 24,
    2002 (No. 333-68294).            
|   
|(2) | Incorporated by reference to the
    Registrants Amendment No. 4 to Form S-1 filed
    with the Securities and Exchange Commission on February 5,
    2002 (No. 333-68294).            
|   
|(3) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    May 4, 2002 filed with the Securities and Exchange
    Commission on June 13, 2002.        
|   
|(4) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    May 3, 2003 filed with the Securities and Exchange
    Commission on June 13, 2003.        
|   
|(5) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    August 2, 2003 filed with the Securities and Exchange
    Commission on September 12, 2003.