Financial Analysis of Gamestop Revenue

Uyen Ho Luis Garcia Mario Pineda Viet Nguyen Acct 460: Seminar in Financial Statement Analysis Ongoing Project Model:Gamestop (GME) 1. Revenue Recognition Revenue is the largest item on the income statement, and we must assess it on a quantitative and qualitative basis. • Use horizontal analysis to identify any time trends. • Read the management's discussion and analysis (MD&A) section of the 10-K to learn how the companies' senior managers explain revenue levels and changes. As of 2021, The increase in net sales was primarily attributable to ongoing demand of the new gaming consoles from Sony and Microsoft, the continued sell-through of the Nintendo gaming product lines, an increase in store traffic compared to the prior year during the onset of the COVID-19 pandemic, and the impact of our product category expansion efforts. Net sales increased $920.9 million, or 18.1%, in fiscal 2021 compared to fiscal 2020. Net sales during fiscal 2021 in our United States, Canada and Europe segments improved by 22.5%, 28.6% and 14.1%, respectively, while net sales in our Australia segment decreased 5.4%, when compared to fiscal 2020. Our goal is to determine whether each company's revenue levels and changes seem appropriate and in line with external factors. Additional analysis : (a) If the company distinguishes among types of revenue on the income statement, use horizontal and vertical analyses to identify any changes in the product line mix or where sales are growing most quickly. Find the footnote on segment revenues and profits and identify trends or significant changes. GameStop has distinguished different types of revenue which is revenue from sales, subscription, and deferred revenue. According to Horizontal analysis, in 2022 GameStop has imported a good amount of merchandise which is more than 50% of merchandise inventory of 2021.For hardware & accessories and software, the growth percentages are 25.3% and 1.8% respectively. The sale of collectibles grew significantly 42.1% compared to the previous year. Therefore, collectibles could be the factor that increases their net sales 18% compared to net sales in 2021 and yields 7% in gross profit. (b)Assess each company's revenue recognition policy by comparing it with the other and with those of some other close competitors.