GameStop Corp. (GME)

ITEM 2. 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 condensed consolidated financial statements, including the notes thereto set forth in Part I, Item 1 of this Form 10-Q. 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. 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. All forward-looking statements included in this Form 10-Q are based upon information available to us as of the filing date of this Form 10-Q, and we undertake no obligation to update or revise any of these forward-looking statements for any reason, whether as a result of new information, future events or otherwise after the date of this Form 10-Q, except as required by law. You should not place undue reliance on these forward-looking statements. The forward-looking statements involve a number of risks and uncertainties. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Certain factors, which may cause actual results to vary materially from these forward-looking statements, accompany such statements and are discussed in our 2025 Annual Report on Form 10-K, including the disclosures under Part I, Item 1A "Risk Factors."

OVERVIEW

GameStop Corp. ("GameStop," "we," "us," "our" or the "Company"), a Delaware corporation established in 1996, offers games, collectibles, and entertainment products through its stores and ecommerce platforms. As we navigate the evolving commercial landscape, our business model is expanding beyond traditional retail to include value creation through disciplined capital allocation, and we view our significant cash and other sources of liquidity as a strategic asset to be deployed into investments, acquisitions, and control transactions that we believe offer long-term value.

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BUSINESS PRIORITIES

Our strategy has evolved into two distinct but complementary pillars:

•Capital Allocation: Utilizing our significant capital resources to actively evaluate and execute on opportunities to acquire, invest in, or partner with businesses that offer long-term value.

•Operational Excellence: Maximizing the cash flow of our legacy retail business by optimizing our store fleet.

Capital Deployment and Investment Strategy

The Company views its balance sheet as a strategic asset. We continue to review the best use for our cash and other sources of liquidity, including potential control transactions and transformational acquisitions.

While we do not limit our review to specific industries, our Investment Committee is actively evaluating opportunities that offer long-term value.

Investment Policy & Guidelines

Investments are made in accordance with the guidelines of an Investment Policy that is reviewed at least annually by the Board. Permissible investment instruments include cash and cash equivalents (e.g., bank obligations, money market funds, and commercial paper), fixed income securities (e.g., obligations of the U.S. Treasury), equity securities (limited to those listed on major exchanges), derivative instruments and options, and certain crypto-currencies, including Bitcoin.

To ensure the Company can act on these opportunities with speed and efficiency, the Board has delegated authority to an Investment Committee of the Board to manage the Company’s cash and other sources of liquidity and to review potential acquisition and control opportunities.

•Structure: The Committee consists of the Company’s Chairman and Chief Executive Officer, Ryan Cohen, and two independent members of the Board.

•Alignment of Interests: Depending on certain market conditions and various risk factors, Mr. Cohen or other members of the Investment Committee, each in their personal capacity or through affiliated investment vehicles, may at times invest in the same securities in which the Company invests. The Board anticipates that such investments will align the interests of the Company with the interests of related parties because it places the personal resources of such directors at risk in substantially the same manner as resources of the Company.

Retail Business

We are optimizing our retail footprint. We view our extensive domestic network of physical locations not merely as stores, but as fulfillment and service anchors that provide immediate capabilities.

Expand Our Addressable Market

The Company continues to explore ways to increase the size of its addressable market through new product and service offerings.

•Strategic Validation: Our recent initiatives have validated our thesis that consumers value transactional speed and convenience. By utilizing our stores as efficient trade-in destinations, we have demonstrated that our infrastructure can drive transaction volume and customer engagement.

•The Network Effect: We believe our dense store network serves as a competitive advantage.

Maximize Profitability

The Company continues to focus on cost containment to maximize operating income.

•Indirect Spend: We have focused on eliminating non-income generating spend. In fiscal 2025, we significantly reduced indirect costs and intend to continue this discipline in 2026.

•International Streamlining: We continue to evaluate our international assets for strategic relevance. In the past three years, the Company has exited operations in Ireland, Switzerland, Austria, Germany, New Zealand, Italy and Canada. In addition, the Company has signed an agreement related to a potential sale of its operations in France to a strategic buyer.

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•Store Fleet Optimization: Each year, the Company performs a comprehensive store portfolio optimization review which involves identifying stores for closure based on many factors, including an evaluation of current market conditions and individual store performance. This review resulted in the closure of 727 stores in the United States in fiscal 2025. At this time, we do not anticipate closing a significant number of stores in fiscal 2026, as we view our domestic footprint as a core component of our logistics infrastructure strategy.

Forward-Looking Statement on Acquisitions

While the Company has no binding agreements for a specific transaction at this time, we are actively evaluating opportunities that could require significant capital deployment. Shareholders should understand that our strategy is now explicitly focused on leveraging our cash, flexible capital structure, and stock to acquire assets that we believe will undergo a significant re-rating under our stewardship.

Subsequent to the end of the first quarter of fiscal 2026, the Company announced a non-binding proposal to acquire eBay Inc.

First Quarter Developments

During the first quarter of fiscal 2026, we continued to advance the strategic priorities we pursued throughout fiscal 2025. Net sales increased 14.0% to $835.3 million compared to the prior-year period — a positive comparison achieved notwithstanding the smaller store base and reduced international footprint resulting from the actions we took during fiscal 2025, including the closure of underperforming stores in the United States, the divestiture of our Canadian operations, and the wind-down of our operations in New Zealand. The increase was driven primarily by continued growth in our collectibles category.

Consistent with our focus on the growth of collectibles, we continued to expand the store space and roll out new fixtures dedicated to the category to support in-store collectibles sales.

We also continued our profit-optimization efforts during the quarter, including further reductions in selling, general and administrative expenses through ongoing cost-discipline and indirect-spend initiatives.

Consistent with our capital allocation strategy, during the first quarter of fiscal 2026 we obtained economic exposure to approximately 5% of eBay's outstanding common stock through a series of put and call option transactions. These transactions resulted in a Derivative asset and an Unrealized gain on derivative asset, net recognized during the quarter. See "Liquidity and Capital Resources" below and Part I, Item 1, "Notes to the Condensed Consolidated Financial Statements" for additional information.

Our balance sheet continued to reflect the proceeds of our 0.00% Convertible Senior Notes due 2030 and 2032, our Bitcoin treasury reserve holdings and related receivables, and the Warrant Distribution completed in fiscal 2025 (NYSE: GME WS), under which a nominal number of warrants were exercised during the quarter. Total Cash, cash equivalents, Marketable securities, Digital assets and related receivables, and Collateral pledged for derivative assets were $9,721.0 million as of May 2, 2026. This total included $7,397.6 million of Cash and cash equivalents, $970.5 million of Marketable securities, $983.3 million of Collateral pledged for derivative asset during the quarter, and approximately $369.6 million in Digital assets and related receivables.

As previously announced, we have entered into an agreement for the potential sale of our operations in France. We do not anticipate closing a significant number of stores in fiscal 2026, as we view our domestic store footprint as a core component of our logistics and fulfillment infrastructure.

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CONSOLIDATED RESULTS OF OPERATIONS

The following table presents certain statement of operations items and as a percentage of Net sales:

(1) "NM" identifies data that is not meaningful.

The Three Months Ended May 2, 2026 Compared to the Three Months Ended May 3, 2025

Net Sales

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

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

In Management’s Discussion and Analysis of Financial Condition and Results of Operations, we provide a detailed analysis for fiscal 2025 compared to fiscal 2024. For a comparison of our results of operations for fiscal 2024 compared to fiscal 2023, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended February 1, 2025, as filed with the SEC on March 25, 2025.

OVERVIEW

GameStop Corp. (“GameStop,” “we,” “us,” “our” or the “Company”), a Delaware corporation established in 1996, is a leading specialty retailer offering games, collectibles, and entertainment products. As we navigate the evolving commercial landscape, our business model is expanding beyond traditional retail to include value creation through disciplined capital allocation. We view our significant cash and liquidity position as a strategic asset to be deployed into acquisitions, and control transactions that offer long-term value.

In 2025, we drove our strategy (as described in Item 1) through the following initiatives:

•Growth of Collectibles. In 2025, we continued to expand our collectibles business, increasing its contribution from 19% of total sales in 2024 to 29% of total sales in 2025. This growth was driven in part by the rollout of our graded trading card submission services to all U.S. stores, expanded store space dedicated to collectibles, the continued development of our first-party repack offerings, and other strategic initiatives.

•Capital Allocation. In 2025, the Company opportunistically raised approximately $4.2 billion through the issuance of interest-free convertibles notes and generated more than $319 million in interest income through its disciplined treasury management activities.

•Profit Optimization

•Indirect Spend: We have focused on eliminating non-income generating expenditures. In 2025, we significantly reduced indirect costs and intend to continue this discipline in 2026.

•International Streamlining: We continued to evaluate our international operations for strategic relevance. In 2025, we divested our operations in Canada and shutdown our operations in New Zealand.

•Store Fleet Optimization: Each year, we conduct a comprehensive review of our store portfolio to identify underperforming locations for closure based on market conditions, operational performance, and other relevant factors. This review resulted in the closure of 727 stores in the United States during fiscal 2025. At this time, we do not anticipate closing a significant number of stores in fiscal 2026, as our domestic store footprint remains a core component of our logistics infrastructure strategy.

•New Initiatives. In 2025, the Company launched Power Packs, a new digital trading platform in partnership with Collectors Holdings, Inc, through its Professional Sports Authenticator ("PSA") division. Early beta results have been promising. Power Packs is an online e-commerce experience through which collectors purchase graded PSA trading cards that are securely stored in the PSA vault. Cards can be instantly sold back, traded, shipped to the collector, or held for future offers.

STORE COUNT INFORMATION

The following table presents the number of stores by segment as of the end of fiscal 2025 compared to the end of fiscal 2024.

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CONSOLIDATED RESULTS OF OPERATIONS

The following table presents certain statement of operations items (in millions) and as a percentage of net sales:

(1) “NM” is data that is not meaningful.

Net Sales

The following table presents net sales by significant product category:

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The following table presents net sales by reportable segment:

During fiscal 2025, total net sales decreased $193.1 million or 5.1% compared to the prior year. Net sales increased 22.2% in Australia and 3.6% in the United States, while net sales declined 81.3% in Canada and 32.7% in Europe. The overall decrease in consolidated net sales was primarily driven by a $276.1 million or 27.5% decline in software sales and a $259.3 million or 12.3% decline in hardware and accessories, partially offset by a $342.3 million or 47.7% increase in collectibles sales. The decline in the Canada segment reflects the divestiture of that business in the second quarter of fiscal 2025, while the decline in the Europe segment was primarily due to the divestiture of Italy and the closure of our operations in Germany, both completed during the second half of fiscal 2024.

Gross Profit

Gross profit increased $82.2 million, or 7.4%, in fiscal 2025 compared to the prior year, and gross profit as a percentage of net sales increased to 33.0% from 29.1% in the prior year.

The increase in both gross profit and gross margin was primarily driven by a shift in sales mix towards higher-margin product categories, particularly collectibles. Sales of collectibles increased to 29.2% of total net sales in fiscal 2025, compared to 18.8% in the prior year.

Selling, General, and Administrative Expenses

Selling, general, and administrative ("SG&A") expenses decreased $220.2 million, or 19.5%, in fiscal 2025 compared to the prior year. SG&A as a percentage of net sales decreased to 25.1% in fiscal 2025, from 29.6% in the prior year.

The reduction in SG&A was driven by a $96.4 million decrease in labor-related costs, consulting services, and marketing expenses as part of our ongoing cost-optimization initiatives. In addition, store-related rent and occupancy costs and depreciation expense decreased $94.7 million and $19.2 million, respectively, primarily due to store closures and international divestitures completed in recent periods.

Asset Impairments

Asset impairment expense was $53.8 million in fiscal 2025, compared to $9.7 million in the prior fiscal year. As a percentage of net sales, impairment expense increased to 1.5% in fiscal 2025 from 0.3% in the prior year. The increase was primarily attributable to management's plan, approved in the first quarter of fiscal 2025, to divest the Company's operations in Canada and France, resulting in the reclassification of the related assets and liabilities as held for sale. We recorded $18.3 million of impairment expense related to the Canadian disposal group in the first quarter, and the divestiture was completed during the second quarter of fiscal 2025. Impairment expense of $29.8 million was recorded on the French disposal group during fiscal 2025, reflecting remeasurements of carrying value relative to fair value.

In the prior year, impairment charges primarily related to management's plan, approved during the third quarter of fiscal 2024, to divest the Company's operations in Italy. See Item 8, Notes to the Consolidated Financial Statements, Note 5 "Segment Information" for additional information related to the impact of impairment charges by segment.

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Interest Income, Net

Interest income, net increased $108.1 million to $271.5 million in fiscal 2025, compared to $163.4 million in the prior year. The increase was primarily driven by higher cash, cash equivalent, and marketable securities balances resulting from the issuance of the Convertible 2030 Notes and Convertible 2032 Notes, partially offset by $42.2 million of non-cash interest expense related to the issuance of warrants to the holders of the Convertible Notes.

Loss on Digital Assets and Related Receivables

Loss on digital assets and related receivables increased to $131.6 million in fiscal 2025, compared to no such loss in the prior year. This represented 3.6% of net sales in fiscal 2025. The loss reflects a $71.8 million realized loss recognized upon derecognition of our digital assets (Bitcoin) pledged as collateral in our covered call strategy, a $59.7 million unrealized loss on the resulting digital asset receivable, and a $0.1 million remeasurement loss on our

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