Arnaud SEITE arnaud.seite@ yahoo.fr 1 GameStop Corporation Inevitable stock price fall for next 12 months following recent surge The late January 2020 stock price rally of GameStop (GME) made a lot of noise in the financial world and even to neophytes. In two weeks, the stock went from $18 up to $350, and then back to a stable price of 50ish until it went back up to $100 on Februar y 24th Despite this surge, the company ’ s financial items show many weak nesses . In 2019, the company had a net loss of $470.9M, a n EBIT of $( 399.6 ) M and a ROCE of (75.2 ) %. Gam eStop ’ s sustainability is at risk as shows ratios over the years. Accordingly, we should see a shrink in the company ’ s stock price with a floor estimate of $11.64 and a Tar ge t Price of $2 4. 65 The company and its B usiness Strategies GameStop Corp. is a Delaware corporation established in 1996 It is the world's largest video game omn i - channel retailer which operates approximately 5,500 stores across 14 countries such as the United States, Canada, Australia, New Zealand, and Europe The company is headquartered in Grapevine, Texas It offers a vast selection of new and pre - owned video gaming consoles, accessories and video game titles, in both physical and digital formats. GameStop also offers fans a wide variety of POP! vinyl figures, collectibles board games and more. Through GameStop's unique buy - sell - trade program, gamers can trade in video game consoles, games, and accessories, as well as consumer electronics for cash or in - store credit. The company declined during the mid - late 2010s due to the shift of video game sales to online storefronts and failed investments by GameStop in sm artphone retail. In 2005, the company acquire d EB Games for $ 1.44 billion , acquisition which expanded GamesStop ’s operations into Europe, Canada, Australia and New Ze aland. Between 2005 and 2013, GameStop acquired more than ten major companies such as R hino Video Games, Micromania or Spring Mobile. The m arket for physical game media has been in a state of decline since online services such as Xbox Live, PlayStation Network, Nintendo eShop, and Steam, all of which offer downloadable digital versions of ga mes, have taken over. GameStop, whose business was l ong rooted in new and pre - owned software, has begun feeling the effects of the changing market. In 2017, GameStop reported a 16.4% drop in sales for the 2016 holiday season, but expressed optimism in its non - physical gaming businesses. Reasons cited for the decline in sales included industry weakness, promotional pricing pressure, and lower in - store traffic. The financial results for 2018 showed the biggest loss in GameStop company history. For the 52 - week period ending on February 2, 2019, GameStop reported a record - breaking net loss of $673 million. This was a change from the net profit of $34.7 million in the previous year. The net sales for fiscal year 2018 were down year - on - year to $8.29 billion, a dec rease of 3 percent. Equity Research GameStop Corp. (NYSE : GME) (NYSE : GME) Vid eo game s Industry 127.50 3 4 .5 1 24.65 11 64 Current pri ce Optimi stic scenario Target Price Pessimistic scenario Current p rice ( 25 - Feb - 202 1 ) USD 127.5 0 Target price ( 25 - F eb - 20 2 2 ) USD 2 4 65 12 - month Recommendation SELL 52 - wk Range $ 3 4 51 – 1 1 64 Market Cap ( milli ons ) $ 8 , 654 Forecasted 2020 EPS $ (4.39) – (5.82) Forecasted 2 020 RNOA (35 .0 ) % – ( 42 .0 )% 5 - years daily Beta 0. 81 6 Current P/E 0.00 Current P/B 24.33 Stock performance vs N YSE Ind ex: 0 50 100 150 200 250 300 350 400 Feb, 2019 Apr, 2019 Jun, 2019 Aug, 2019 Oct, 2019 Dec, 2019 Feb, 2020 Apr, 2020 Jun, 2020 Aug, 2020 Oct, 2020 Dec, 2020 GME NYSE Arnaud SEITE arnaud.seite@ yahoo.fr 2 In 2019 , The company focused on the following four strategic pillars: • Optimize the Core: Op timize the core business by improving efficiency and effectiveness across the organization, including cost restructuring, inventory managem en t optimization, adding and growing high - margin product categories, and rationalizing the global store base. • Become the Social / Cultural Hub for Gaming: Create the social and cultural hub of gaming across the GameStop platform by testing and improving ex is ting core assets including the store experience, knowledgeable associates a nd the PowerUp Rewards loyalty program. • Build Digital Platform: Build compelling digital capabilities, including the r ecent relaunch of GameStop.com, to reach customers more broad ly across the omni - channel platform and give them the full spectrum of content and access to products they desire. • Transform Vendor Partnerships: Transform our vendor and partner relationships to unlock additional high - margin revenue streams and optimize t he lifetime value of every customer. For 2020, the company ’s strategy was to continue to proact ively manage the business with the goal to increase financial flexibility and protect cash flow in the current environment . The levers would be continuing to de cr ease inventory and payables in order to strengthen the balance sheets as we navigate the challenges of Covid - 19. The main focus es on expense, inventory and capital expenditure reductions would help preserve the financial health despite the disruption bro ug ht on by various global ch allenges. Reformulate d Financial Statements Reformulated Statement of Operations in millions 2019 2018 2017 Net sales 6 466.0 8 285.3 8 547.1 Cost of sales - 4 557.3 - 5 977.2 - 6 062.2 Gross margin 1 908.7 2 308.1 2 484.9 Selling, general and administrative expenses 1 922.7 1 994.2 2 031.9 Operating income from sales before tax - 14.0 313.9 453.0 Taxes reported 37.6 41.7 153.5 Tax effect of financial income 4.6 38.2 12.2 Tax on other operating income 85.1 224.2 3.0 Op erating income from sales after tax 38.1 534.5 314.7 Goodwill impairments 363.9 970.7 0.0 Asset impairments 21.7 45.2 13.8 Tax on other operating income 85.1 224.2 3.0 Operating income after tax - 432.6 - 705.5 297.9 Foreing currency translation adjustm ents - 24.5 - 63.4 59.5 Reclassification of realized gain of oreing currency translation adjustments 0 - 3.1 0 Interest income - 11.3 - 5.7 - 1.5 Interest expenses 38.5 56.8 56.8 Income from discontinued operations, net of tax - 6.5 121.8 - 195.7 Tax effect o f financial income 4.6 38.2 12.2 Financing income after tax - 62.8 - 34.0 - 203.7 Comprehensive income - 495.4 - 739.5 94.2 Arnaud SEITE arnaud.seite@ yahoo.fr 3 Reformulated Balance Sheet in millions 2019 2018 2017 Operating assets 2 807.9 4 044.3 4 381.5 Cash and cash equivalents 49 9.4 1 624.4 854.2 Receivables, net 141.9 134.2 138.6 Merchandise inventories, net 859.7 1250.5 1250.3 Prepaid expenses and other current assets 120.9 118.6 115.2 Property and equipment, net 275.9 321.3 351 Operating lease right - of - use assets 767 0 0 Deferred income taxes 83 147.3 158.2 Goodwill 0 363.9 1350.5 Other noncurrent assets 60.1 84.1 163.5 Operating liabilities 1 767.0 1 831.9 1 935.8 Accounts payable 380.8 1051.9 892.3 Accrued liabilities and other current liabilities 617.5 780 987 .6 Current portion of operating lease liabilities 239.4 0 50.9 Operating lease liabilities 529.3 0 5 Net operating assets 1 040.9 2 212.4 2 445.7 Financial assets 11.8 0.0 660.1 Assets held for sale 11.8 0.0 660.1 Financial liabilities 441.2 876.2 891.3 Current portion of debt, net 0 349.2 0 Long - term debt, net 419.8 471.6 817.9 Other long - term liabilities 21.4 55.4 73.4 Net financial assets - 429.4 - 876.2 - 231.2 Common Shareholders' Equity 611.5 1 336.2 2 214.5 V aluat ion Optimistic Pro - forma Vitasoy's forecasted financial statements in millions 2017 2018 2019 2020 2021 2022 2023 2024 Sales growth rate - 3% - 22% - 5% 15% 5% - 5% - 10% Sales 8 547.1 8 285.3 6 466.0 6 142.7 7 0 64.1 7 417.3 7 046.4 6 341.8 Cost of sales 6 062.2 5 977.2 4 557.3 4 361.3 4 803.6 5 117.9 5 003.0 4 566.1 Gross Margin rate 29% 28% 30% 29% 32% 31% 29% 28% Gross Margin 2 484.9 2 308.1 1 908.7 1 781.4 2 260.5 2 299.4 2 043.5 1 775.7 Expense ratio 24% 36% 36% 34% 32% 30% 29% 28% Expenses 2 045. 7 3 010.1 2 308.3 2 088.5 2 260.5 2 225.2 2 043.5 1 775.7 EBIT 439.2 - 702.0 - 399.6 - 307.1 0.0 74.2 0.0 0.0 Number of shares outstanding 101.5 102.1 87.5 70.0 70.0 70.0 70.0 70.0 Core EPS 4.33 - 6.88 - 4.57 - 4.39 0.00 1.06 0.00 0.00 Dividends paid 155.20 157.40 40.50 0.00 0.00 29.67 26.60 26.60 Core DPS 1.53 1.55 0.43 0.00 0.00 0.42 0.38 0.38 Arnaud SEITE arnaud.seite@ yahoo.fr 4 ATO 3.49 3.74 6.21 7.00 7.00 6.75 6.75 6.50 NOA 2 445.7 2 212.4 1 040.9 877.5 1 009.2 1 098.9 1 043.9 975.7 Free Cash Flow - 468.7 771.9 - 143.8 - 131.6 - 15.5 54.9 68.3 Core RNOA 18.0% - 31.7% - 38.4% - 35.0% 0.0% 6.8% 0.0% 0.0% - Profit margin 5.1% - 8.5% - 6.2% - 5.0% 0.0% 1.0% 0.0% 0.0% - Asset turnover 3.49 3.74 6.21 7.00 7.00 6.75 6.75 6.50 Growth in NOA - 9. 5% - 53.0% - 15.7% 15.0% 8.9% - 5.0% - 6.5% Res idual OI - 839.8 - 524.3 - 365.8 - 49.4 17.3 - 61.9 - 58.8 Cash taxes 41.7 37.6 - 67.8 0.0 16.4 0.0 0.0 NOPAT - 743.7 - 437.2 - 239.4 0.0 57.8 0.0 0.0 D&A 126.9 96.2 81.8 73.6 69.9 69.9 69.9 EBITDA - 575.1 - 303.4 - 225.4 73.6 144.1 69.9 69.9 CAPEX - 93.7 - 7 8.5 - 66.7 - 60.1 - 54.0 - 51.3 - 51.3 Changes in NWC 47.2 452.8 - 221.8 - 214.2 - 102.6 - 17.9 38.1 Unlevered FCF - 570.3 - 715.3 130.9 347.8 284.4 139.2 83.1 Optimistic NWC forecast 2017 2018 2019 2020 2021 2022 2 023 2024 ∆NWC 47.2 452.8 - 221.8 - 214.2 - 102.6 - 17.9 38.1 NWC - 375.8 - 328.6 124.2 - 97.6 - 311.7 - 414.4 - 432.3 - 394.2 DRIVERS: - Days in receivables (decrease) 5.92 5.91 8.01 8.32 7.23 6.89 7.25 8.06 - Days in inventory (decrease) 75.28 76.36 68.8 5 49.46 33.12 24.48 20.97 20.39 - Days in payable (increase) 53.72 64.23 30.50 30.28 26.11 23.28 22.63 23.55 - Other current assets / Sales 1.3% 1.4% 1.9% 2.0% 2.0% 2.1% 2.1% 2.2% - Other current liabilities / Sales 11.6% 9.4% 9.5% 9.6% 9.7% 9. 8% 9.9% 10.0% Sales 8 547.1 8 285.3 6 466.0 6 142.7 7 064.1 7 417.3 7 046.4 6 341.8 Cost of sales 6 062.2 5 977.2 4 557.3 4 361.3 4 803.6 5 117.9 5 003.0 4 566.1 Account receivables 138.6 134.2 141.9 140 140 140 140 140 Inventory 1250.3 1250.5 859.7 59 1.0 435.9 343.2 287.5 255.1 Other current assets 115.2 118.6 120.9 122.9 141.3 155.8 148.0 139.5 Account payable 892.3 1051.9 380.8 361.8 343.7 326.5 310.2 294.7 Other current liabilities 987.6 780 617.5 589.7 685.2 726.9 697.6 634.2 Blue Sky Discount ed Cash Flow Valuation (EBIT - ∆NOA) in millions, except present and target values 2019 2020 2021 2022 2023 2024 Free Cash Flow 771.9 - 143.8 - 131.6 - 15.5 54.9 68.3 Discount rate 5.63% Perpetual growth rate 3.00% Discount period 1 2 3 4 5 Present Value of FCF - 136.1 - 118.0 - 13.2 44.1 51.9 Continuing Value 2 736.7 Present Value of Continuing Value 2 080.7 Total Present Value 2 681.3 # of shares outstanding (12 - 2019) 87.5 Share Value (12 - 2019) 30.64 Target Price (02 - 2022) 34.51 Arnaud SEITE arnaud.seite@ yahoo.fr 5 Grey Sky Discounted Cash Flow Valuation (EBIT - ∆NOA) in millions, except present and target values 2019 2020 2021 2022 2023 2024 Free Cash Flow 771.9 - 336.4 - 394.7 - 324.6 - 116.7 73.2 Discount rate 5.63% Perpetual growth rate 2.00% Discount period 1 2 3 4 5 Present Value of FCF - 318.4 - 353.8 - 275.3 - 93.7 55.6 Continuing Value 2 126.9 Present Value of Continuing Value 1 617.0 Total Present Value 1 403.3 # of shares outstanding (12 - 2019) 87.5 Share Value (12 - 201 9) 16.04 Target Price (02 - 2022) 18.06 Pessimistic Pro - forma Vitasoy's forecasted financial statements in thousands of HKD 2017 2018 2019 2020 2021 2022 2023 2024 2025 Sales growth rate - 3% - 22% - 10% 15% 5% - 10% - 15% - 5% Sales 8 547.1 8 285 .3 6 466.0 5 819.4 6 692.3 7 026.9 6 324.2 5 375.6 5 106.8 Cost of sales 6 062.2 5 977.2 4 557.3 4 248.2 4 684.6 4 989.1 4 553.4 3 870.4 3 625.8 Gross Margin rate 29% 28% 30% 27% 30% 29% 28% 28% 29% Gross Margin 2 484.9 2 308.1 1 908 .7 1 571.2 2 007.7 2 037.8 1 770.8 1 505.2 1 481.0 Expense ratio 24% 36% 36% 34% 33% 32% 31% 30% 29% Expenses 2 045.7 3 010.1 2 308.3 1 978.6 2 208.5 2 248.6 1 960.5 1 612.7 1 481.0 EBIT 439.2 - 702.0 - 399.6 - 407.4 - 200.8 - 210.8 - 189.7 - 107.5 0.0 Number of shares outstandi ng 101.5 102.1 87.5 70.0 70.0 70.0 70.0 70.0 70.0 Core EPS 4.33 - 6.88 - 4.57 - 5.82 - 2.87 - 3.01 - 2.71 - 1.54 0.00 Dividends paid 155.20 157.40 40.50 0.00 0.00 0.00 0.00 0.00 26.60 Core DPS 1.53 1.55 0.43 0.00 0.00 0.00 0.00 0.00 0.38 A TO 3.49 3.74 6.21 6. 00 5.75 5.50 5.25 5.25 5.25 NOA 2 445.7 2 212.4 1 040.9 969.9 1 163.9 1 277.6 1 204.6 1 023.9 972.7 Free Cash Flow - 468.7 771.9 - 336.4 - 394.7 - 324.6 - 116.7 73.2 51.2 Core RNOA 18.0% - 31.7% - 38.4% - 42.0% - 17.3% - 16.5% - 15.8% - 10.5% 0 .0% - Profit margin 5.1% - 8.5% - 6.2% - 7.0% - 3.0% - 3.0% - 3.0% - 2.0% 0.0% - Asset turnover 3.49 3.74 6.21 6.00 5.75 5.50 5.25 5.25 5.25 Growth in NOA - 9.5% - 53.0% - 6.8% 20.0% 9.8% - 5.7% - 15.0% - 5.0% Residual OI - 839.8 - 524.3 - 466.0 - 255.4 - 276.4 - 261.7 - 175.4 - 57.7 Cash taxes 41.7 37.6 - 89.9 - 44.3 - 46.5 - 41.9 - 23.7 0.0 NOPAT - 743.7 - 437.2 - 317.5 - 156.5 - 164.3 - 147.9 - 83.8 0.0 D&A 126.9 96.2 77.0 65.4 58.9 55.9 55.9 53.1 EBITDA - 575.1 - 303.4 - 330.4 - 135.4 - 151.9 - 133.8 - 51.6 53.1 CA PEX - 93.7 - 78.5 - 62 .8 - 53.4 - 45.4 - 40.8 - 38.8 - 38.8 Changes in NWC 47.2 452.8 - 162.3 - 184.4 - 71.1 34.3 74.0 17.5 Unlevered FCF - 570.3 - 715.3 - 15.4 146.8 11.1 - 85.4 - 63.0 74.4 Arnaud SEITE arnaud.seite@ yahoo.fr 6 Pessimistic NWC forecast 2017 2018 2019 2020 2021 2022 2023 2024 2025 ∆NWC 47.2 452.8 - 1 6 2.3 - 184.4 - 71.1 34.3 74.0 17.5 NWC - 375.8 - 328.6 124.2 - 38.1 - 222.5 - 293.6 - 259.3 - 185.4 - 167.8 DRIVERS: - Days in receivables (decrease) 5.92 5.91 8.01 9.41 8.65 8.71 10.24 12.73 14.17 - Days in inventory (decrease) 75.28 76.36 68.85 50.78 33.96 25.11 23.04 24.06 25.36 - Days in payable (increase) 53.72 64.23 30.50 29.45 24.03 20.31 20.03 21.21 22.64 - Other current assets / Sales 1.3% 1.4% 1.9% 2.0% 2.0% 2.1% 2.2% 2.2% 2.1% - Other current liabilities / Sales 11.6% 9.4% 9 5% 9.5% 9.6% 9.6% 9.7% 9.7% 9.8% Sales 8 547.1 8 285.3 6 466.0 5 819.4 6 692.3 7 026.9 6 324.2 5 375.6 5 106.8 Cost of sales 6 062.2 5 977.2 4 557.3 4 248.2 4 684.6 4 989.1 4 553.4 3 870.4 3 625.8 Account receivables 138.6 134.2 141.9 150.0 158.7 167.8 177.4 187.6 198.3 Inventory 1250.3 1250.5 859.7 591.0 435.9 343.2 287.5 255.1 251.9 Other current assets 115.2 118.6 120.9 116.4 133.8 147.6 139.1 118.3 107.2 Account payable 892.3 1051.9 380.8 342.7 308.4 277.6 249.8 224.9 224.9 Other current liabili t ies 987.6 780 617.5 552.8 642.5 674.6 613.5 521.4 500.5 Blue Sky Discounted Unlevered Cash Flow Valuation in millions, except present and target values 2019 2020 2021 2022 2023 2024 Unlevered FCF - 715.3 130.9 347.8 284.4 139.2 83.1 Discount rate 5.63 % Perpetual growth rate 3.00% Discount period 1 2 3 4 5 Present Value of FCF 123.9 311.7 241.3 111.8 63.2 Continuing Value 3 333.2 Present Value of Continuing Value 2 534.1 Total Present Value 2 670.7 # of shares ou t standing (12 - 2019) 87.5 Share Value (12 - 2019) 30.52 Target Price (02 - 2022) 34.37 Grey Sky Discounted Unlevered Cash Flow Valuation in millions, except present and target values 2019 2020 2021 2022 2023 2024 2025 Unlevered FCF - 715.3 - 1 5.4 146.8 11.1 - 85.4 - 63.0 74.4 Discount rate 5.63% Perpetual growth rate 2.00% Discount period 1 2 3 4 5 6 Present Value of FCF - 14.6 131.5 9.4 - 68.6 - 47.9 53.6 Continuing Value 2 162.7 Present Value of Continuing Value 1 556.6 Total Present Value 904.7 # of shares outstanding (12 - 2019) 87.5 Share Value (12 - 2019) 10.34 Target Price (02 - 2022) 11.64 Arnaud SEITE arnaud.seite@ yahoo.fr 7 Blue Sky scenario ($34.44 Target price) : - Sales are slightly worsening in 2020 but great r eb ound in 2021 thanks to Next Gen consoles - Gross margin rate getting bett er in 2021 thanks to the com pan y ’ s strategy to cut costs - Expense ratio reduces each year thanks to stores closing down - ATO rises in 202 0 - 2021 because of GameStop ’ s strategy to cut cos ts bu t t hen reduces because of sales falling do wn - D&A and CAPEX decreas ing down to a floor level because of store closing down a nd none opening G rey sky scenario ($14.85 Target price) : - Sales are worsening in 2020 with a great rebound in 2021 thanks to Nex t G en consoles Consid erable decrease from 2023 - Gross margin rate stagnates - Expense ratio reduces each year thanks to stores closing down - ATO reduces each year because of sales falling do wn - D&A and CAPEX decreas ing because of store closing down a nd none o pen ing Sensitivity analysis - Blue Sky Discounted Cash Flow Valuation Sensitivity analysis - Grey Sky Discounted Cash Flow Valuation Perpetual growth rate Perpetual growth rate 2.00% 2.25% 2.50% 2.75% 3.00% 2.00% 2.25% 2.50% 2.75% 3.00% WACC 4.63% 36.86 40.07 44.07 49.2 56.03 WACC 4.63% 28.47 31.91 36.2 41.71 49.02 5.13% 31.57 33.72 36.3 39.45 43.38 5.13% 22.81 25.11 27.88 31.26 35.47 5.63% 27.79 29.33 31.12 33.23 35.76 5.63% 18.76 20.41 22.32 24.59 27.3 6.13% 24.97 26.11 27.42 28.92 30.68 6.13% 15.73 16.95 18.36 19.97 21.85 6.63% 22.77 23.65 24.64 25.77 27.05 6.63% 13.37 14.32 15.38 16.59 17.96 Sensitivity analysis - Blue Sky Discounted Unlevered Cash Flow Valuation Sensit ivity analysis - Grey Sky Discounted Unlevered Cash Flow Valuation Perpetual growth rate Perpetual growth rate 2.00% 2.25% 2.50% 2.75% 3.00% 2.00% 2.25% 2.50% 2.75% 3.00% WACC 4.63% 37.55 41.46 46.34 52.59 60.9 WACC 4.63% 22.03 25.37 29.55 34.9 1 42.02 5.13% 30.98 33.6 36.74 40.58 45.36 5.13% 16.4 18.63 21.31 24.58 28.66 5.63% 26.24 28.11 30.29 32.87 35.95 5.63% 12.38 13.97 15.81 18 20.61 6.13% 22.67 24.06 25.65 27.49 29.62 6.13% 9.37 10.55 11.89 13.44 15.25 6.63% 19.86 20.93 22.14 23.51 25.07 6.63% 7.04 7.95 8.96 10.11 11.42 WACC Computation Equity financing (%) 38.7% Cost of Equity 6.23% Debt financing (%) 61.3% Cost of Debt 6.75% Tax rate 22.07% WACC 5.63% • Equity and Debt ratio s using No n - current liabilities and S tockholders ’ equity • Cost of Equity using CAPM formu la with 0.93% as risk free rate, 7.42% as market rate ( annualized NYSE from 1985 ), 0.816 as Be ta (us ing 5 - year GME and NYSE daily data) • Cost of Debt in regards to the 2019 annu al report • Tax rate is a w eighted average tax rate of each country where GameStop is located Arnaud SEITE arnaud.seite@ yahoo.fr 8 ROCE breakdown 2019 2018 2017 Return on Capital Employ ed - 75.20% - 56.63% 10.96% - Return on Net Operati ng Assets * - 41.56% - 31.89% 12.18% - Profit Margin - 6.69% - 8.52% 3.49% Gross margin 29.52% 27.86% 29.07% Expenses 29.74% 24.07% 23.77% Impairments 5.96% 12.26% 0.16% - A sset Turnover 6.21 3.74 3.49 Ca s h 7.72% 19.61% 9.99% Receivables 2.19% 1.62% 1.62% Inventory 13.30% 15.09% 14.63% Prepaid expenses 1.87% 1.43% 1.35% PPE 4.27% 3.88% 4.11% Payables 5.89% 12.70% 10.44% Accrued liabilities 9.55% 9.41% 11.55% - F inancial Leverage 70.22% 65.57% 10.44% - N et Borowwing Cost 6.33% 5.83% 23.92% Interest expense 8.97% 6.48% 24.57% Interest income 2.63% 0.65% 0.65% *RNOA - 41.56% - 31.89% 12.18% - R eturn on Operati ng Asset - 14.46% - 16.77% 7.46% - O perating Liabilities Leverage 169.76% 82.80% 79.15% - O perating Liabilities Spread - 15.96% - 18.27% 5.96% GameStop ’ s ROCE shrinked the past three years from a positive 10% to a negative 75% in 2019. To get the reasons, it can be broken down in to t hree drivers: RNOA, FLEV and NBC. The FLEV has been increasing which is supposed to be positive when RNOA is positive, however it isn ’ t. Neg ative leverage is then higher in 2019 than before. The NBC fall in 2018 can be e xplained by a huge amo unt of assets held for sale in 2017 ($660.1 millions ) . No assets held would have give n a 6.2 % NBC for 2017. The continuingly decreasing RNOA can be broken down into PM and ATO and into R OOA, OLLEV and OLSPREAD • PM has been widely affected by the negative profit since 2 018 coming from increasing expenses and impa irments. ATO rose mainly thanks to the huge decline in cash and inventory following the company ’ s business strategy. • ROOA was affected by negative profit. OLLEV surged for the same reason than ATO did. For OLSPREAD, we used a 1.5% as mentioned in the 2019 annual report