Entertainment & Leisure

Jeffrey S. Thomison, CFA

J.J.B. Hilliard, W.L. Lyons, LLC
502.588.9137 / JThomison@hilliard.com
April 21, 2011

COMPANY UPDATE / RATING CHANGE GameStop Corp.

GME — NYSE — Neutral-3
Key Metrics
GME - NYSE (as of 4/20/11) $26.35 Lowering Rating to Neutral
Price Target N/A
52-Week Range $17.7-$26.94 Investment Highlights
Shares Outstanding (mm) 152 x We are lowering our rating on GME to Neutral
Market Cap. ($mm) $3,707
from Buy. This downgrade is based solely on recent
3-Mo. Average Daily Volume 4,650,585
Institutional Ow nership 91%
share price appreciation and not company
Long-Term Debt/Total Capital (1/11) 8% fundamentals. In the calendar year-to-date period,
ROE (1/11) 13.4% GME shares are up 15% compared to a 6% increase for
Book Value/Share (1/11) $18.3 the S&P 500. More recently, over the past month the
Price/Book Value 1.4x stock is up 24% versus a 2% gain for the overall
Dividend Yield Nil
market. Most importantly, GME has nearly reached
LTM EBITDA Margin (1/11) 8.8%
our former price target of $27 per share.
EPS FY 1/31* (excludes nonrecurring items) x The company recently conducted its first ever
Prior Curr. investor conference and sentiment seemed to
2009 2010 2011E 2011E
improve considerably following the event. We were
1Q $0.43 $0.48 -- $0.53
2Q $0.23 $0.26 -- $0.28
impressed with the company’s extensive slide show
3Q $0.32 $0.38 -- $0.41 presentation, which covered a multi-faceted strategy
4Q $1.29 $1.56 -- $1.62 including maximizing the potential of the store base,
Year $2.27 $2.67 $2.84 improving the high-margin pre-owned game business,
P/E 11.6x 9.9x 9.3x focusing on digital sales opportunities, and deploying
*Fiscal year ends Saturday clo sest to January 31o f the fo llo wing year. free cash flow.
Quarterly EP S figures may no t add to annual figure due to ro unding.
x We believe overall business risk has declined over
Revenue ($mm) the past few quarters. The trend toward digital sales
Prior Curr. has seemingly gone from a perceived threat to an
2009 2010 2011E 2011E attractive opportunity for GameStop, the videogame
1Q $1,981 $2,083 -- -- industry’s largest retailer. Recent management team
2Q $1,738 $1,799 -- -- additions, some acquisitions, and new business
3Q $1,835 $1,899 -- --
4Q $3,524 $3,693 -- --
ventures have collectively improved the company’s
Year $9,078 $9,474 $9,810 $10,060 digital prospects considerably, in our view.
x Although the stock valuation remains somewhat
Company Description: GameStop Corp. is the world’s appealing to us, we believe a favorable earnings
largest videogame retailer. The company sells new and
outlook and improving digital prospects are largely
pre-owned software, hardware, and accessories for
current gaming systems and the PC. The company factored in the share price. Our previous price target
recently operated 6,670 stores in 17 countries. GameStop of $27 reflected a 9.0 multiple applied to our FY12
also operates e-commerce sites, owns browser-based EPS estimate. With this target nearly realized (much
game site Kongregate.com, and publishes Game Informer earlier than we expected), we are inclined to move to
magazine (the largest multi-platform videogame magazine the sidelines for now as we prefer a lower price for
in the U.S.). purchases.

Note Important Disclosures on Pages 5-6.

Note Analyst Certification on Page 5.
GameStop Corp. April 21, 2011

INVESTOR CONFERENCE HIGHLIGHTS

On April 1, 2011, GameStop conducted its first-ever investor conference near its Grapevine,
Texas headquarters. We were unable to attend the conference live, but listened via webcast. In addition,
the company made available its 80-page slide presentation. We believe the conference had a favorable
impact on investor sentiment. A deep, senior level management team participated, including recent hires,
and insight on the company’s digital sales strategies was encouraging, in our view. In sum, we believe
the trend of digital sales has evolved from perceived threat to attractive opportunity for the videogame
industry’s largest retailer. Below are some highlights from the slide presentation.
x Management recognized a changing industry landscape in 2008 and began developing business
plans related to downloadable content, customer loyalty program, and e-commerce.
x The global gaming market is estimated to grow about 6% annually through 2014.
x Greater efficiencies could result from selected closing of overlapping retail stores that resulted
from past acquisitions.
x New stores in underserved markets have relatively flexible leases and generate strong returns.
x International operations have recently improved and much opportunity exists for adding stores in
high growth markets and closing stores in underperforming markets.
x Compounded annual growth for worldwide industry digital sales is expected at about 15%
through 2014. GME expects its total digital sales to grow at more than twice this rate.
x Digital opportunities include sale of videogame content at GameStop.com, downloadable content
via in-store kiosks, full-game PC downloads, and digital issues of Game Informer magazine.
x Recent acquisitions should boost GME’s digital capabilities: Spawn Labs owns patented
technology for digital streaming of videogames and Impulse, Inc. has a digital distribution
platform that specializes in downloading of games to Internet-connected devices.
x Opportunities exist in the high-margin pre-owned business, as currently less than half of
customers are buying used games and less than 20% are trading in (selling) games.
x The PowerUp customer loyalty program was recently launched and has already grown to over 8
million members; management expects 12-15 million by the end of 2011.
x PowerUp members are spending more than 3x the amount of non-members; members have listed
over 90 million games they own, which helps GME in terms of selling downloadable content for
certain games or boosting its pre-owned game business by means of targeted marketing.
x Higher earnings and lower capital spending needs should boost free cash flow by 10% in 2011;
debt retirement and stock buybacks may continue, as could acquisitions.
x Earnings growth could come from continued expansion of the PowerUp loyalty program, market
share gains, same-store sales growth at retail stores, greater profitability of store base from
strategic downsizing, growth of digital revenue streams, and utilization of free cash flow.

OUTLOOK

Despite an uncertain consumer spending environment, recent sluggishness in industry sales, and
investment community concerns regarding digital sales of videogames, GME management has painted a
relatively bright picture for the current fiscal year. The company’s packaged good segment seems to have
firmed up and numerous high-profile releases are slated for the coming quarters. Over the past year, the
company’s share of such releases has increased due to strong marketing campaigns and coordinated
efforts from the major publishers. The PowerUp customer loyalty program has exceeded expectations
and holds much potential, in our view. Finally, the company seems to be a key participant in the industry
trend toward digital sales of videogames, rather than a potential victim. We expect the digital business to
grow over 50% annually in the near term, with the packaged goods segment holding steady.

Hilliard Lyons Equity Research 2 Entertainment & Leisure

GameStop Corp. April 21, 2011

VALUATION & OPINION

GME shares are trading at 9.3 times our FY11 EPS projection of $2.84, a higher valuation than
earlier this year or much of last year. GME’s forward price/earnings multiple has been in the range of
roughly 7 to 35 over the past five years, with an average multiple of about 11.5. We attribute GME’s
relatively low valuation to several factors, including recent industry sluggishness, the potential impact of
competitive entry (such as the used game business), and long-term risks associated with distribution of
videogames. While the current multiple still seems relatively low, we believe considerable share price
appreciation this year has reduced the stock’s near-term attractiveness.

With recent considerable share price gains, our former price target of $27 was nearly realized.
This target reflected a price/earnings multiple of 9.0 applied to our preliminary FY12 EPS estimate of
$3.00. This is above recent valuations as low as 7 times estimated forward earnings. Although the stock
valuation has some appeal to us, we believe a favorable earnings outlook and improving digital prospects
are largely factored in the current price. With our price target essentially realized (much earlier than we
expected), we are inclined to move to the sidelines for now as we believe the shares could be susceptible
to some profit-taking from shorter term investors. We could reinstate our purchase recommendation on a
potential pullback in the share price, assuming no change in company fundamentals.

RISKS & SUITABILITY

Among concerns frequently raised by the investment community are competitive entry to the
used game business and digital downloading of content by consumers. While new entrants to the used
game business over the past year or so have raised some concern among investors, we feel GME has
competitive advantages such as those related to inventory, pricing acumen, employee expertise, and
marketing. To date, management has not seen an adverse impact on its stores from competitive entry into
the used gaming sector. Digital distribution of videogames is likely to continue growing, but we believe
GameStop has been pro-active in developing a digital sales strategy that seems, at this early juncture, to
be effective.

Other risk factors associated with investments in GameStop include changes or delays in
publishers’ product release schedules; relationships with and adequate supply from publishers,
distributors, and hardware manufacturers; lease terms for stores; cyclicality of industry sales;
macroeconomic risk; seasonality or dependence on holiday sales; ability to negotiate and integrate
acquisitions; and geopolitical risks to international operations.

Our Suitability rating on GME is 3 on a 1-to-4 scale (1=most conservative, 4=most aggressive),
and is primarily based on these factors.

Hilliard Lyons Equity Research 3 Entertainment & Leisure

 Exhibit 1
Consolidated Statements of Income (figures in thousands except per share data and percentages)
FY07 FY08 1Q 2Q 3Q 4Q FY09 1Q 2Q 3Q 4Q FY10 FY11E

Total Sales 7,093,962 8,805,897 1,980,753 1,738,504 1,834,727 3,524,013 9,077,997 2,082,697 1,799,093 1,899,152 3,692,800 9,473,742 10,060,000
Cost of Sales 5,280,255 6,535,762 1,438,640 1,243,098 1,311,643 2,649,964 6,643,345 1,511,916 1,282,267 1,352,835 2,789,100 6,936,118 7,376,000
GameStop Corp.

Gross Profit 1,813,707 2,270,135 542,113 495,406 523,084 874,049 2,434,652 570,781 516,826 546,317 903,700 2,537,624 2,684,000
SG&A Exp. 1,182,016 1,445,419 375,832 384,773 391,210 483,309 1,635,124 403,836 404,964 408,854 482,700 1,700,354 1,834,000
EBITDA 631,691 824,716 166,281 110,633 131,874 390,740 799,528 166,945 111,862 137,463 421,000 837,270 850,000
Depreciation and Amortization 130,270 145,004 37,827 39,677 41,605 43,386 162,495 42,513 42,235 44,670 45,300 174,718 185,000
Operating Income 501,421 679,712 128,454 70,956 90,269 347,354 637,033 124,432 69,627 92,793 375,700 662,552 665,000

Hilliard Lyons Equity Research

Interest Expense, net 47,774 38,837 11,681 11,275 10,466 9,755 43,177 9,574 10,038 9,669 6,000 35,281 22,000
Income Before Taxes 453,647 640,875 116,773 59,681 79,803 337,599 593,856 114,858 59,589 83,124 369,700 627,271 643,000
Income Tax Expense 156,760 238,595 44,600 20,996 26,000 123,213 214,790 40,019 19,761 25,046 131,900 216,726 231,480
Consol. Net Income $296,887 $402,280 $72,173 $38,685 $53,803 214,386 379,066 74,839 39,828 58,078 237,800 410,545 411,520
Loss Attrib. to Noncontrol. Int. (1,536) (1,536) (333) (515) (396) 0 (1,244) 0
N.I. Attrib. to GameStop $215,922 $380,602 $75,172 $40,343 $58,474 $237,800 $411,789 $411,520

Diluted EPS $1.80 $2.40 $0.43 $0.23 $0.32 $1.29 $2.27 $0.48 $0.26 $0.38 $1.56 $2.67 $2.84

Avg. Diluted Shares Outst. 164,844 167,671 167,972 167,857 168,113 167,556 167,875 156,484 154,154 153,276 152,100 154,000 145,000

4
Stores - end of period 5,264 6,207 6,245 6,333 6,391 6,450 6,450 6,486 6,549 6,606 6,670 6,670 6,675
Yr-over-yr store count % chg. 10.2% 17.9% 14.5% 14.0% 11.5% 3.9% 3.9% 3.9% 3.4% 3.4% 3.4% 3.4% 0.1%
Comparable-store sales % chg. 24.7% 12.3% (1.5%) (14.1%) (7.8%) (7.9%) (7.9%) (1.6%) 0.9% 1.1% 2.6% 1.1% 3.8%

% of Sales:
Gross Profit 25.57% 25.78% 27.37% 28.50% 28.51% 24.80% 26.82% 27.41% 28.73% 28.77% 24.47% 26.79% 26.68%
SG&A Exp. 16.66% 16.41% 18.97% 22.13% 21.32% 13.71% 18.01% 19.39% 22.51% 21.53% 13.07% 17.95% 18.23%
EBITDA 8.90% 9.37% 8.39% 6.36% 7.19% 11.09% 8.81% 8.02% 6.22% 7.24% 11.40% 8.84% 8.45%
Operating Income 7.07% 7.72% 6.49% 4.08% 4.92% 9.86% 7.02% 5.97% 3.87% 4.89% 10.17% 6.99% 6.61%
Net Income 4.19% 4.57% 3.64% 2.23% 2.93% 6.13% 4.19% 3.61% 2.24% 3.08% 6.44% 4.35% 4.09%

Tax Rate 34.56% 37.23% 38.19% 35.18% 32.58% 36.50% 36.17% 34.84% 33.16% 30.13% 35.68% 34.55% 36.00%

% Year-Over-Year Change
Total Sales 33.37% 24.13% 9.22% (3.65%) 8.20% 0.91% 3.09% 5.15% 3.49% 3.51% 4.79% 4.36% 6.19%
Cost of Sales 37.24% 23.78% 7.34% (5.85%) 7.31% (0.11%) 1.65% 5.09% 3.15% 3.14% 5.25% 4.41% 6.34%
SG&A Exp. 18.19% 22.28% 14.35% 10.65% 16.53% 11.55% 13.12% 7.45% 5.25% 4.51% (0.13%) 3.99% 7.86%
EBITDA 134.03% 30.56% 14.88% (18.88%) (4.24%) (3.73%) (3.05%) 0.40% 1.11% 4.24% 7.74% 4.72% 1.52%
Operating Income 38.73% 35.56% 16.88% (29.09%) (11.45%) (5.56%) (6.28%) (3.13%) (1.87%) 2.80% 8.16% 4.01% 0.37%
Net Income 59.60% 35.50% 13.81% (32.33%) (5.99%) (3.81%) (5.39%) 4.16% 4.29% 8.68% 10.92% 8.63% 0.24%

Note: Income statements exclude merger-related and debt extinguishment costs

Source: GameStop and Hilliard Lyons estimates Note: Fiscal year ends on Saturday closest to Jan. 31
April 21, 2011

Entertainment & Leisure

GameStop Corp. April 21, 2011

Additional information is available upon request.

Analyst Certification

I, Jeffrey S. Thomison, hereby certify that the views expressed in this research report accurately reflect
my personal views about the subject company(ies) and its (their) securities. I also certify that I have not
been, am not, and will not be receiving direct or indirect compensation in exchange for expressing the
specific recommendation(s) in this report.

Important Disclosures

Hilliard Lyons' analysts receive bonus compensation based on Hilliard Lyons’ profitability. They do not
receive direct payments from investment banking activity.

Investment Ratings
Buy - We believe the stock has significant total return potential in the coming 12 months.
Long-term Buy - We believe the stock is an above average holding in its sector, and expect solid returns
to be realized over a longer time frame than our Buy rated issues.
Neutral - We believe the stock is an average holding in its sector, is currently fully valued, and may be
used as a source of funds if better opportunities arise.
Underperform - We believe the stock is vulnerable to a price set back in the next 12 months.

Suitability Ratings
1 - A large cap, core holding with a solid history
2 - A historically secure company which could be cyclical, has a shorter history than a "1" or is subject to
event driven setbacks
3 - An above average risk/reward ratio could be due to small size, lack of product diversity, sporadic
earnings or high leverage
4 - Speculative, due to small size, inconsistent profitability, erratic revenue, volatility, low trading volume
or a narrow customer or product base

Hilliard Lyons Investment Banking

Recommended Issues Provided in Past 12 Mo.
# of % of
Rating Stocks Covered Stocks Covered Banking No Banking
Buy 40 24% 0% 100%
Long-term Buy 35 21% 6% 94%
Neutral 89 53% 1% 99%
Underperform 3 2% 0% 100%
Restricted 1 1% 100% 0%
As of 4 April 2011

Hilliard Lyons Equity Research 5 Entertainment & Leisure

GameStop Corp. April 21, 2011

Note: Price targets accompanying Buy ratings reflect a one year time period while price targets accompanying Long-term Buy
ratings reflect a two to three year time period.

Other Disclosures

Opinions expressed are subject to change without notice and do not take into account the particular
investment objectives, financial situation or needs of individual investors. Employees of J.J.B. Hilliard,
W.L. Lyons, LLC or its affiliates may, at times, release written or oral commentary, technical analysis or
trading strategies that differ from the opinions expressed here.

J.J.B. Hilliard, W.L. Lyons, LLC is a multi-disciplined financial services firm that regularly seeks
investment banking assignments and compensation from issuers for services including, but not limited to,
acting as an underwriter in an offering or financial advisor in a merger or acquisition, or serving as
placement agent in private transactions.

The information herein has been obtained from sources we believe to be reliable but is not guaranteed and
does not purport to be a complete statement of all material factors. This is for informational purposes and
is not a solicitation of orders to purchase or sell securities. Reproduction is forbidden unless authorized.
All rights reserved.

J.J.B. Hilliard, W.L. Lyons, LLC has entered into an agreement with Morgan Joseph TriArtisan LLC
whereby Morgan Joseph TriArtisan LLC pays Hilliard Lyons based on revenues generated by Morgan
Joseph TriArtisan LLC from Hilliard Lyons research.

Hilliard Lyons Equity Research 6 Entertainment & Leisure