Classification of Leases and Risks Incident to Ownership

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The provided content discusses the classification of leases, distinguishing between finance leases and operating leases based on risks and rewards transfer, along with the risks and rewards incident to ownership in lease agreements. It covers the definition of a lease, finance lease versus operating lease, and factors to consider in determining the lease type. Additionally, it explains the objectives, scope, and application of lease accounting standards.

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B B BARNA Management School Consulting Team GameStop: A new lease on life, or game over? Presented by: Alexander Diaz, Betsy Jimenez, Loren Medrano & Nathalie Duarte Key Issue + Recommendation Analysis Strategy Implementation Financials Risks January 2020

B AGENDA CONTEXT KEY ISSUE + RECOMMENDATION ANALYSIS STRATEGY IMPLEMENTATION FINANCIALS RISKS Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B CONTEXT FROM TO 31 YEARS OLD AVG CONSUMER PROFILE ONLINE FIRST COMMUNITIES - MULTIPLAYER GAME TEEN USERS SHRINK-WRAPPED VIDEO GAMES ONE PLAYER GAME There s a new industry delivery channel Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B COMPETITORS TRADITIONAL DOWNLOAD Origin Best buy Target UPlay Walmart Steam KMart Highly competitive market Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B VALUE PROPOSITION GameStop 5,830 stores (1,700 square feet avg in high traffic places) Multichannel retailer video-game Available in USA PRODUCTS Game software (new/pre- owned) Gaming consoles Accessories GameStop Group: 5 different brands Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B KEY ISSUE + RECOMMENDATION How should Gamestop prepare for the future gaming market trends? New Commercial mix Channels Strategy Financial Health consumer trends Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B KEY ISSUE + RECOMMENDATION How should Gamestop prepare for the future gaming market trends? New Commercial mix Channels Strategy Financial Health consumer trends Recommendation: TRANSFORM the company strategy Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B OBJECTIVES SURPASS GAMESTOP S CONSUMER EXPECTATION DEVELOP A ROCK SOLID STRATEGY INCREASE VALUE CREATION Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B B BARNA Management School Consulting Team STRATEGY Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B ALTERNATIVES 1 SELL the company 2 Go 100% online TRANSFORM the company strategy 3 Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B CRITERIA Future growth opportunity Profitability Consumer centric oriented Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B DECISION MATRIX Future growth opportunity Profitability Consumer centric oriented SELL the company Go 100% online TRANSFORM the company strategy Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B DECISION MATRIX Future growth opportunity Profitability Consumer centric oriented SELL the company Go 100% online TRANSFORM the company strategy Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B B BARNA Management School Consulting Team RECOMMENDATION: TRANSFORM the company strategy Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B WHY IS THIS YOUR BEST OPTION? SUCCESS! High profitability perspective Grow and keep your community Step toward market trends Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B B BARNA Management School Consulting Team ACTION PLAN Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

How we are going to transform the company strategy? B COMMERCIAL MIX CHANNELS CONSUMER Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

How we are going to transform the company strategy? B COMMERCIAL MIX 1. Develop new verticals 2. Improve actual product mix Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B 1. Develop new verticals Strong differentiation vs. competitors High profitability products. Align to consumer trends. WHY 1. Develop streaming services leveraging in our current platform Game Informer Magazine. Will be available in Mobile App and Website. HOW 2. Play in store experience. Subscription model USD$25 monthly. Gamers can go to physical stores to play. Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B Play in store experience LIVE E-Sports Viewing parties GameStop Own Tournament Sell GameStop Products GameStop Community Food and beer sales Meet, greet and PLAY with gamers influencers Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B 2. Improve actual product mix High profitability in some product of our current portfolio. Some publishers doesn t want GameStop to sell online codes. WHY 1. Sell more following products: Accessories segment (37.2% gross profit) Digital currency (88.5% gross profit) Collectibles (33% gross profit) HOW 2. Give special discounts to our GameStop Community subscribers (10% for on going and 20% as a birthday gift). *Applies for some products. Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

How we are going to transform the company strategy? B Improve actual channel mix: From 15% online / 85% offline to 55% online / 45% offline to 2022 CHANNELS Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B 2. Improve actual channel mix Consumers are changing their shopping habits, from offline to online. WHY 1. Downsize physical stores in a 35% in 3 years from 5,830 to 3,780. Cut same proportion for square feet. 2. Reduce employees structure according to previous recommendation. 3. Open new hub experience stores in China (50) and Japon (20). HOW Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

ACTUAL PHYSICAL STORES B FROM GameStop International Locations by Country Country USA Canada Australia New Zealand Austria Denmark Finland France Germany Ireland Italy Norway Sweden Switzerland TT # of locations Weight (%) 3846 311 419 43 25 34 16 420 208 50 361 28 52 17 5830 # of employees 66% 5% 7% 1% 0% 1% 0% 7% 4% 1% 6% 0% 1% 0% 100% 40,241 3,254 4,384 450 262 356 167 4,395 2,176 523 3,777 293 544 178 61000 Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

ACTUAL PHYSICAL STORES B FROM TO Physical Stores - Closing proposal Employees GameStop International Locations by Country 17% 2020 654 53 71 13% 2021 511 41 56 5% 35% TT 1352 109 147 15 35% TT Country USA Canada Australia New Zealand Austria Denmark Finland France Germany Ireland Italy Norway Sweden Switzerland TT # of locations Weight (%) 3846 311 419 43 25 34 16 420 208 50 361 28 52 17 5830 # of employees 2022 188 15 20 66% 5% 7% 1% 0% 1% 0% 7% 4% 1% 6% 0% 1% 0% 100% 40,241 3,254 4,384 450 262 356 167 4,395 2,176 523 3,777 293 544 178 61000 14,084 1,139 1,534 157 7 4 6 3 6 3 5 2 2 1 2 1 9 92 125 59 12 6 148 73 18 127 10 18 71 35 9 61 5 9 3 991 56 28 7 48 4 7 2 774 20 10 2 18 1 3 1 285 1,538 762 183 1,322 103 190 6 62 2050 21350 Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B NEW HUB EXPERIENCES STORES GameStop International Locations by Country Country China Japon TT # of locations # of employees 50 20 70 250 100 350 Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

How we are going to transform the company strategy? B 1. Develop omnichannel strategy to increase consumer experience. CONSUMER Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

WHO IS YOUR CUSTOMER? You MUST include all of them! B GAMERS Occasional gamers Heavy gamers Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

1. Develop omnichannel strategy to increase consumer experience. We need to get to know our customers in order to offer a personalized experience. Large data base. B WHY 1. Include big data tools to analyze GameStop customers. 2. Allow customers to make reservation for play in store experiences and e-sports tournaments worldwide. HOW Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

GANTT Implementation timeline USD Millions B 2019 2020 2021 2022 2023 Budget Store Downsizing Employee Downsize Store Remodeling Experience Ecommerce Communication Plan In Store Tournaments Open China and Japan Develop App Develop Omni Channel Strategy Big Data Implementation 0 5 385 1 10 7 0.2 2 5 415.2 Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B B BARNA Management School Consulting Team FINANCIALS Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B FINANCIAL ASSUMPTIONS Gross Profit Per Segment New Video Game Hardware 8.50% New Video Game Software 21.50% Pre Owned and Value video Game Products 43.40% Video Game Accessories 32.70% Digital 88.50% Collectibles 33.00% Other 30.50% Streaming 50.00% In Store Experience Services 40.00% Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B FINANCIAL ASSUMPTIONS Average Spend in Streaming Platform 27 USD Income TAX 30% Source of Funding: Own Cash and Bank Loan Current % of DEBT: 67% Cash on Hand: 1,640.5 Millions USD 100 Authorized Stock not sold Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B COMMERCIAL MIX EVOLUTION EXPERIENCE AND STREAMING 17.5% OF REVENUE BY 2023 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2018 2019 2020 2021 2022 2023 New Video Game Hardware New Video Game Software Pre Owned and Value video Game Products Video Game Accessories Digital Collectibles Other Streaming In Store Experience Services Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B NET REVENUE EVOLUTION Net Sales Total (USD Millions) EXPERIENCE AND STREAMING 17.5% OF REVENUE BY 2023 9,052.07 8,606 8,500 8,442 8,409 NET REVENUE CAGR 2019 - 2023 1.5% 8,285 2018 2019 2020 2021 2022 2023 Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B GROSS PROFIT EVOLUTION Gross Profit (USD Millions) COMMERCIAL MIX EVOLUTION AS A KEY DRIVER FOR GROSS PROFIT INCREASE 2,718.35 2,506.84 2,423.33 2,411.39 2,393.15 GROSS PROFIT CAGR 2019 - 2023 2.8% Gross Profit as % of Revenue 30.0% 29.1% 28.7% 28.5% 28.4% 27.9% 2018 2019 2020 2021 2022 2023 Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B NET PROFIT EVOLUTION Net Income (% of Revenue) EFFICIENCIES IN OPERATIONAL COSTS RESULING FROM DOWNSIZING, LEASE CONTRACTS ENDING 5.5% 5.1% 4.9% 4.4% 3.9% NET INCOME MAINLY AFFECTED BY GOODWILL IMPAIRMENT (970 USD MILLIONS), BY END OF 2018 ONLY 350 USD MILLIONS IN GOODWILL REMAINS 2018 2019 2020 2021 2022 2023 -8.1% Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B VALUE OF SHARE Basic Earnings per Share EARNINGS PER SHARE AS A RESULT OF IMPROVEMENT OF NET INCOME 4.90 4.31 4.02 3.65 3.25 2018 2019 2020 2021 2022 2023 (6.60) Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B B BARNA Management School Consulting Team RISKS Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

RISKS Contingency Plan B Risks Game publishers restriction Impact Mitigation Agreement to pay a fee for these services High Actual costumer rejection Med 1 month free subscription and access to play in store experience. Not growing as expected Med Promotions and an aggressive plan to increase subscribers. Leveraging on big data. Accelerate online planning. High commercial mall closing faster than our plan Low Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B B BARNA Management School Consulting Team KEY TAKEAWAYS Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B KEY ISSUE + RECOMMENDATION How should Gamestop prepare for the future gaming market trends? New Commercial mix Channels Strategy Financial Health consumer trends Recommendation: TRANSFORM the company strategy Key Issue + Recommendation Analysis Strategy Implementation Financials Risks

B OBJECTIVES: SURPASS GAMESTOP S CONSUMER EXPECTATION DEVELOP A ROCK SOLID STRATEGY INCREASE VALUE CREATION Key Issue + Recommendation Analysis Strategy Implementation Financials Risks