Thank you. And welcome to GameStop’s second quarter fiscal 2019 earnings and conference call. This conference call will include forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Any such statements should be considered in conjunction with the cautionary statements and Safe Harbor statement in the earnings release and risk factors discussed in reports filed with the SEC. GameStop assumes no obligation to update any of these forward-looking statements or information. A reconciliation and other information regarding non-GAAP financial measures discussed on the call can be found in the earnings release issued earlier today as well as in the Investor Section of our website. With me today are GameStop’s, Chief Executive Officer, George Sherman; and Chief Financial Officer, Jim Bell. On today's call George will not only discuss some highlights from our second fiscal quarter, but also share specific details of GameStop strategic framework for the future. Jim will then provide more detail on our financial results and some key expectations for the remainder of the year and into 2020. Now, I would like to turn the call over to the company's Chief Executive Officer, George Sherman.

Thank you. Good afternoon, everyone, and thank you for joining us today on our second quarter earnings call. As I mentioned in our last call, I along with my new management team, have been moving quickly to assess the business and develop our strategy to reposition the organization for the future. Following numerous meetings with stakeholders, from across every aspect of our business, we have acquired valuable feedback and data to further reform our direction and, believe, we are formulating the strategic framework and specific initiatives to achieve our long-term growth and profit objectives. We are committed to taking quick and deliberate actions to improve the performance of the company and set on the correct strategic path, fully leveraging our unique position and brand in the video game industry. I believe that during the call today, you will hear that we are fully committed to that mission and are acting with a sense of urgency to address the areas of the business that are critical to achieving long-term success and value creation. We recognize that there was a need to rebuild credibility with the investment community and some of our stakeholders. We plan to accomplish this by quickly establishing a track record of delivering on our promises and executing plans for the business that will support improved financial performance and fuel future growth over the long-term. You're going to hear a similar message from Jim Bell regarding clarity of financial metrics and appropriate level of transparency for how we hold ourselves accountable in meeting our objectives. To that end, today we will outline a strategy that includes both near-term and long-term measurable objectives, which we plan to track our progress against each quarter. Let's get into the details of that plan. Our strategic plan is anchored on four key tenets:…

Thank you, George, and good afternoon, everyone. It's great to be with you here today. I like George, was drawn to GameStop by the enormous potential of this business. GameStop's strong brand positioning and engagement with the large passionate customer base has the leading authority in all things video games, along with the opportunity to be part of a leadership team, driving innovation and transformation make this an exciting and pivotal time to be at GameStop. My initial observations are very much aligned with George's and the other members of our senior leadership team. We have quickly joined forces to take definitive actions on things that needed to be done, such as exiting unprofitable businesses, rightsizing our cost structure, applying deep retail expertise to elevate the overall efficacy of our operations and setting the stage for developing new revenue streams for the future of the business, particularly as the videogame industry continues to evolve. However as George shared, we are not done and have a lot of work in front of us. But we are acting with a sense of urgency, making tough but necessary decisions and moving forward with the disciplined approach to deploying these strategies which we believe will position GameStop to maximize shareholder value. We are committed to providing you with as much transparency as possible and updating you as we progress through the transformation of the business which is specifically intended to restore credibility amongst the investment community. Now I would like to shift to the recap of the second quarter results. From the topline perspective, total sales declined $315.4 million or 14.3% as compared to the second quarter of 2018. The sales decline was comprised of an 11.6% comparable store sales decline, a 130 basis points related to 195 store closures since the second quarter…

Thank you. [Operator Instructions] We will now take our first question from Steph Wissink of Jefferies. Please go ahead.

Hi, everyone. I mean, I want to focus on three areas if we can. George my first question is for you is on initiative number for a transforming your vendor partnerships. I'm wondering if you can talk a little bit about some of the incremental or additional high margin revenue streams that you see in that specific agenda item? Again, just give us a sneak peek at some of those things that you might be looking at. And then my second question is you spotlighted collectible as one of the areas of outperformance. I think you mentioned 14 or 15 quarters of double-digit comp growth. Can you talk a little bit more about how that range of products has evolved? How do you think this business has evolved? How you're thinking about collectibles as a core driver under some of the new initiatives that you described at the beginning of the call? Thank you.

Yeah. Thanks, Steph. I think starting off with your question on the transforming vendor partner relationships as that covers a very broad spectrum. I think first and foremost, we never really had truly negotiated as a global company, and that's certainly part of our focus going forward. We're looking at the full spectrum of opportunities with our partners. I think that includes new revenue streams, and I think that includes things like digital exclusive, physical exclusive just as we've done in the past. When we talk about high margin categories, we are referring to other categories as well like private label. We find on a global basis that the U.S. private label penetration is lower than our other operating businesses. And that, there's an opportunity there to go ahead and drive more of that, and we certainly look at categories that we think that we've been missing for a while like PC gaming. Kind of transitioning into collectibles, clearly, that's a high margin category for us as well. It's been successful. I think there's been a level of trial and error along the way with collectibles, because it was new to us. I’d say that our view as to where success lies in collectibles has become much more focused and we're able to kind of hone in on those areas. So it's one that we intend to grow. It's one that we see continued double-digit growth ahead. It's one that we see as a means of attracting new customers in the gaming, which is very, very important for our vendor partners is bringing new folks into gaming for the first time as very often collectibles customers are not necessarily core gamers, so.

Thank you.

Thank you. Good luck tomorrow with your trading day for the Bahamas by the way. Thanks.

Thank you.

Our next question comes from Joe Feldman of Telsey Advisory Group. Please go ahead.

Yeah. Hi, guys. I wanted to understand that you made a comment about digital subscription model for games. Can you give a little more color on that, and like kind of what you’re thinking on that front?

Joe, I don't recall the comment on digital subscription. It's clearly something that some of our partners are getting into. And as we collaborate with them, it's important to them, it's important to us. And we certainly see the sale of digital subscriptions as part of our future on their behalf, but no more specifics in that right now.

Got it. All right. Sorry, I may misheard it. I thought, I heard subscription and associated it with digital. So I apologize on that. With regard to the collectibles growth that you guys have had over the past few years, it's just been great. But how much of it is an increasing penetration of collectibles whether in the store, or just adding more SKUs versus driving incremental demand in that category?

Yeah. It's actually more about incremental demand. I mean, in fact, we’re thinking about -- as we go forward, George talked about SKU rationalization. This is an area that we have an opportunity to be more efficient and effective with the inventory within collectibles. So if we think about SKU base across side, it's more about rationalizing the numbers of SKUs and letting those that are highly productive continue to be highly productive and penetrate from a demand perspective.

Got it, got it. Thanks. And then if I could just sneak maybe one more in. You talked about being more formulaic about the approach to store closures in the future. Can you share a little more thought on, like, do you guys have a number in mind? Or do you have a rough estimate of what you think you might need to close? Or is it still little early for that?

I think, we're rapidly developing the point of view on that and we haven't disclosed that. We will share more with you in the future. But suffice it to say, we’re taking a very specific approach that looks at, if you think about this business over multiple years. The inorganic or acquisition growth of this business created opportunities in certain markets where we have quite a dance footprint and where we have -- stores within -- in overlapping trade areas or that overlapping within a trade area. That de-densification gives us the opportunity for transferability, regardless of whether or not we are loss making, one of those two stores for example might be loss making. And so, that's really how we're approaching it. That's the analytic that we're applying. That's why we think about it not as a binary function of loss making versus non-loss making stores. But more importantly, in total, as we rationalize the chain, how can it fully be accretive to -- for bottom line performance.

Yeah. That makes a lot of sense. Thanks for sharing that. I’ll see you too. Thank you.

Thanks a lot Joe.

[Operator Instructions] Our next question comes to us from Ben Schachter of Macquarie. Please go ahead.

Yeah. Can we talk about high-level -- the shift to digital, and then how it impacted the business? So a few questions on that. One, when you think about the next cycle, what percentage of total game, do you think are going to be sold physically versus digital? And what your share might look like in that? Two, how do you expect to participate in digital? How will that evolve for you guys versus what it is today? And then three, around the used business, what does that look like as we move more to digital? And then somewhat separately, you talked about the social cultural hub, I think it’s an interesting thought there and can you talk about how eSports might play into that and how you might use the store footprint to participate there? Thanks.

Yeah, thanks Ben. Let me start off with the question around the next cycle and it's a mix between physical and digital games. Our assumption is that, they'll launch in both formats with the new cycle just as they do now. And our assumption is that, we'll have a piece of both businesses. Obviously, we have a very, very significant share when it comes to physical games. Physical games are still a significant portion of the overall gaming industry today. And as we have noted in our -- in the script, we attached at a significantly higher level on digital gaming than most of the competitive set. We want to make it easier. We want to make it more so. I think it's fair to say that, historically, we probably had a preference for physical games versus digital games and we've been clear to say both internally and externally that we’re going to be agnostic and it has to be the customer's choice, as to which may we sell. So we will focus on making the digital sales process easier, more streamlined, more embedded, and we'll push to make sure that we have that approach. If you think of a trial before you buy type scenario as one of the test that we talked about in Tulsa, it's that customers' choice, as to which minute they want to buy again, physical or digital.

Yeah. As for pre-owned, we think pre-owned is following very similar trends as new physical games are right now. While the category is down, there is no debate about that, it is following the same pattern as we see on the new gaming side of the business; meaning specifically, that our sales around the switch are best performers within pre-owned games and that the other two versions are feeling more the self-pinch right now. We would expect that to continue by the way in the new gaming cycle. I think when you think of the new consoles, there are a couple of things that are pretty significant. One is, backward compatibility. The other is the fact that, both new devices will have a disk drive on them. So certainly, I think when that becomes widely understood that we'll see a bit of a -- another bite to the apple in terms of pre-owned gaming as it will be -- certainly alive and well for few years to come.

Any thoughts on eSports and how that's going to impact the social cultural hub initiative?

Yeah. eSports is something that we've got involved with. We had a partnership with Complexity Gaming. And with that we have the naming rights for their training center here in Dallas. We also have a partnership with Team Envy. So we move closer and closer. We think that it will be a valuable; first of all, content. So, the ability to get content from these facilities, from these teams that we can share with our best customers, that we can share with our in-store gamers. And I mean certainly, I think we looked down the road and if there is significant gaming activity in stores there’s a stream up capability as well. So we certainly see an opportunity to partner and have the -- our version of the little league's going on in stores or the minor league’s going on in stores that could over time lead to a connection with those professional sports businesses.

Our next question comes from Ray Stochel of Consumer Edge Research. Please go ahead.

Great. Thanks for taking my question. You guys had mentioned that you looked at a bunch of data with your stakeholders. Do you guys have a broad sense of some KPIs? What I'd be looking for would be lifetime value, but other KPIs would be helpful as well. Your customers versus the lifetime value or other KPIs of customers acquired from Walmart, Target, Amazon or Best Buy especially for Sony and Microsoft? And then my follow-up question to that would be more on store count, has there been a change in the economics over reverse cannibalization or recapture now with e-commerce? And is your new e-commerce site positioned more effectively to recapture consumers whether that be, the new -- the consumer purchasing new or the consumer purchasing pre-owned? Thanks.

Yes, thanks Ray. I think in the first question as it applies to the data that we -- in our understanding of the customer base, we've done more and more assuring of that with our vendor partners than -- and it’s been mutual. So, I think certainly that's one of our competitive advantage is that, it's a pretty well known fact among our partner community that we over indexed with customers. We have a higher digital attach rate, customers who buy physical games for us buy more games overall; customers who buy from us, buy more accessories overall. So -- and virtually every category that business, whether it be digital, physical games or accessories, you see a higher attachment rate at a GameStop store, no question about it. So, that is certainly something that we are proud of and certainly a view that we share. And again as it applies to the lifetime value, we have more of a cross exchange going out with our vendor partners that we probably have in the past. On the website, I think, couple of things jump to mind. First and foremost, among the new capabilities is buy online pickup in-store. It is a very common in retail, obviously, and I see it was a bit of a disadvantage for us. You could hold online buy in-store, but not buy online pickup in-store. We think that will be a significant growth category for us going forward. We also have what we think is pretty uniquely positioned to ship to home capability at every store in our fleet. So, when you talk about supply, it's not just two distribution centers, it’s virtually every store in our company can service one as well and get product quickly to a customer. Shopability is better, ease of navigation. It was a bit cumbersome to buy for instances soft lines in our prior site. It was clunky when it came to buying by size that's now been fixed in this community aspect of it as well that we think is pretty different.

Great. Thanks again.

Thanks.

[Operator Instructions] Our next question comes from Seth Sigman of Credit Suisse. Please go ahead.

Hi. This is [indiscernible] on for Seth. Thanks for taking our questions. So firstly to start off with the pre-owned business, I think last quarter you spoke of some changes in the business stream that you were looking at investing some models to enhance the value proposition. I mean could you give us some results of the test and frame the magnitude of the margin reset that you may see like in 2H and beyond?

Yeah. We had a couple of test that we are not quite ready to speak to results on and it applies to both pre-owned as well as to our loyalty customer base and the new PowerUp offer. So they are early on. We're seeing some initial good success. I will say that the biggest change that we have made that's now done is it applies to pre-own gaming is to unify the gaming business under our single merchant. So when the past has been fragmented across the pre-owned merchant, a new game merchant and now we own the business across the spectrum including pricing optimization. So that's been the biggest change that's done. There's a couple of things that are, I'd say just too early for us to comment on.

Got it. So, just a follow-up on the cost initiatives. So regarding the profit improvement plan that you guys highlighted, how do we think about that time line? When shall it start showing up, I mean, are we still supposed see some sort of benefit in the back half or like it was the end of 4Q? And then we see the ramping up with the next year?

Yeah. Our initiative, our profit initiative is you can think of almost effectively as a 50/50 split between cost reduction and areas like margin improvement. Obviously, the cost reduction is going to happen fast, and as Jim mentioned in his comments most of what we did here recently happen at the late portion or subsequent to the end of Q2. So it's all very new, but it is now in effect, we think of that call it $100 million of cost reduction opportunity has been roughly 40% complete now. And that's a combination of structural changes that we made as well as some indirect procurement initiatives that have taken hold. So, that gives us a level of confidence again to commit to a $200 million number because we made very, very good progress on -- to get there.

Got it. And just if I can just squeeze one more really quickly here, so regarding some of the initiatives within the store, you guys spoke about rationalizing the collectibles assortment within the store. I mean apart from that, are there any other store resets that you are working on and that you could elaborate on?

Yeah. I'd say generally speaking, we mentioned that we are a week away from a reset in the store. And that's not the end product. It's a step in the right direction. It's what the teams are remarkable job on about six weeks to get things done. So, you're going to see some SKU reduction, you're going to see I'd say better pairing by ecosystem, meaning when you look at your assortment within the Sony Nintendo and Microsoft world that are more logical, there's more accessories pulled in together, there's a bit more private label, there's a bit more attach areas that are part of it. And it's a bit cleaner on the collectibles side of the business as well. And as I mentioned to step on your comments, it would be a much more focused in terms of where we know collectibles works. And there are categories. We have remarkable relationship with Funko and we've been enormously successful with the pops business. It's a big part of our collectibles for us. So, I think you're going to see a step in the right direction, but it's not in any -- in respect to finished product, it's the best effort in a very short period of time.

Got you. Thank you so much.

That's all the time we have for questions. At this time, I will turn the conference back to George Sherman for any additional or closing remarks. Please go ahead.

Yes. Thank you. And thanks to everyone for joining us today on our call. We appreciate your interest in GameStop as always. I have to say coming off of our Preholiday Store Leadership Conference in Nashville just a couple of weeks ago, I want to give a shout out to our store teams, in particular our store managers, and really the entire team overall. I mean it's a wildly enthusiastic group. It's obvious that they already executed in the new direction, they are passionate about moving us forward as quickly as possible, and we have a great team that's ready to win. I want to thank them for their hard work ahead of the important holiday season. Thank you all.

This concludes today's call. Thank you for your participation. You may now disconnect.