New consoles drive positive same store sales in
Q4 and full year
Company completes acquisitions of Simply Mac
and Spring Mobile
2014 full year EPS forecast to increase 13% to
23%
GameStop Corp. (NYSE: GME), a global, multichannel video game,
consumer electronics and wireless services retailer, today reported
sales and earnings for the fourth quarter and fiscal year ended
Feb. 1, 2014.
Paul Raines, chief executive officer, stated, “The launch of new
consoles in 2013 marked the return of innovation to the video game
category and GameStop's market share increased to an all-time high.
Our emerging digital and mobile businesses, which did not exist
three years ago, surpassed $1 billion of revenue. As we push
forward into 2014, both the re-energized video game category and
our new Technology Brands business unit provide us with solid
growth opportunities in the consumer electronics and wireless
markets.”
Fourth Quarter Results
Total global sales for the 13-week fourth quarter of 2013 were
$3.68 billion, a 3.4% increase compared to $3.56 billion in the
14-week prior year quarter. Consolidated comparable store sales
increased 7.8% compared to the prior year quarter. The growth in
sales and comps was driven by the successful launches of
Microsoft’s Xbox One and Sony’s PlayStation 4.
GameStop’s fourth quarter net earnings were $220.5 million,
including goodwill and asset impairment charges, compared to net
earnings of $261.1 million in the prior year quarter. Diluted
earnings per share were $1.89 compared to diluted earnings per
share of $2.15 in the prior year quarter.
Fourth quarter net earnings included goodwill and asset
impairment charges of $28.7 million ($22.8 million, net of tax
benefits), or $0.20 per diluted share, primarily due to the closure
of Spawn Labs and store asset impairments. The company also
recorded a non-recurring benefit of $33.6 million ($20.9 million
after tax), or $0.18 per diluted share, from a change in accounting
estimates primarily related to redemption rates in our PowerUp
Rewards and other customer liability programs. A reconciliation of
non-GAAP adjusted net income to GAAP net income is included with
this release (Schedule III).
Fiscal 2013 Results
For fiscal year 2013, total global sales were $9.04 billion, a
1.7% increase compared to $8.89 billion in fiscal 2012. Full year
consolidated comparable store sales increased 3.8% compared to
fiscal 2012, primarily driven by a 29.7% increase in new video game
hardware sales related to the launches of Microsoft’s Xbox One and
Sony’s PlayStation 4.
New video game software and pre-owned and value products sales
declined 2.8% and 4.1%, respectively. Until the fourth quarter,
these two categories were impacted by limited new title releases
and a decrease in store traffic. For the full year, digital
receipts increased 15.1% to $724.4 million, or $217.7 million of
sales on a GAAP basis. Mobile and consumer electronics sales, which
include Technology Brands revenues, increased 51.6% over 2012.
GameStop’s fiscal 2013 net earnings were $354.2 million,
including the aforementioned charges and non-recurring benefit,
compared to a net loss of $269.7 million, including restructuring,
impairment and debt retirement expenses of $680.7 million ($672.7
million, net of tax benefit), in fiscal 2012. Diluted earnings per
share were $2.99 compared to a loss per share of $2.13 in fiscal
2012.
Capital Allocation
Update
During the fourth quarter of 2013, the company repurchased
1,037,800 shares, or $49.5 million of stock. For fiscal 2013, the
company repurchased 6.28 million shares, or $258.3 million of
stock. In addition, the company paid out $131 million in dividends
during fiscal 2013.
For fiscal 2014, through March 20, GameStop has repurchased
555,200 shares at an average price of $37.17, or $20.6 million
worth of stock. Currently, there is $436.5 million remaining on the
existing repurchase authorization.
On March 4, 2014, the company announced a 20% increase of its
regular annual cash dividend from $1.10 to $1.32 per share. On
March 25, 2014, the company paid its quarterly dividend of $0.33
per share.
2014 Outlook
Based on current market information available, GameStop is
providing the following financial guidance for fiscal 2014,
including growth in net income ranging from 12.0% to 22.0%, in line
with current consensus estimates.
First
Quarter
Fiscal Year
2014
Total Sales 7.0% to 10.0% 8.0% to 14.0% Comparable Store
Sales 5.0% to 8.0% 6.0% to 12.0%
Depreciation & Amortization Expense
(in millions)
$40.0 to $42.0 $165.0 to $175.0 Income Tax Rate 36.5% to
37.5% 36.5% to 37.5% Operating Margin 5.0% to 5.5% 6.5% to
7.0%
Net Income (in millions)
$64.0 to $70.0 $398.0 to $433.0 Weighted Average Shares
Outstanding 116,700,000 117,000,000 Diluted Earnings per
Share $0.55 to $0.60 $3.40 to $3.70
In 2014, GameStop expects to reduce its video game store count
by approximately 2%.
Note: The guidance only includes the effect of the shares
purchased fiscal year-to-date from the existing $500 million share
repurchase plan and is based on the fiscal 2014 forecasted weighted
average shares outstanding of 117,000,000.
Conference Call
Information
A conference call with GameStop Corp.’s management is scheduled
for March 27, 2014 at 10:00 a.m. CDT to discuss the company’s
financial results and to provide its 2014 outlook. The phone number
for the call is 888-211-9951 and the pass code is 7583159. This
call can also be accessed at GameStop Corp.’s investor relations
home page at http://investor.GameStop.com/. The conference call
will be archived for two months on GameStop’s corporate
website.
Supplemental Information
Following the completion of the Simply Mac and Spring Mobile
acquisitions during the fourth quarter of fiscal 2013, in the
company’s SEC filings, we are reporting our business in four Video
Game Brands segments: United States, Canada, Australia and Europe;
and a Technology Brands segment. The Video Game Brands segments
include more than 6,400 stores, along with e-commerce operations,
Game Informer® magazine, www.kongregate.com and an online consumer
electronics marketplace available at www.buymytronics.com.
Our Technology Brands segment includes all of our Simply Mac,
Spring Mobile and Aio Wireless stores. Simply Mac operates 23
stores which sell Apple products, including desktop computers,
laptops, tablets and smartphones and related accessories. As an
authorized Apple reseller, Simply Mac also offers certified
training, warranty and repair services to its customers. Spring
Mobile sells post-paid AT&T services and wireless products
through its 164 AT&T branded stores. Aio Wireless is a new
AT&T brand offering pre-paid wireless services, devices and
related accessories. We have opened 31 Aio Wireless stores in
recent months in select markets throughout the United States.
Non-GAAP Measures
GameStop reports its financial results in accordance with U.S.
generally accepted accounting principles (GAAP). However,
management believes excluding certain items (restructuring,
impairment and changes in management estimates) from the company’s
financial results provides management and the investors with a
clearer perspective of the current operating performance of the
company and an improved comparison to prior period results. We
believe it also provides useful information to investors and other
users of GameStop's financial statements. Non-GAAP financial
measures should be viewed in addition to, and not as an alternative
for, the company's reported GAAP financial results.
About GameStop
GameStop Corp. (NYSE: GME), a Fortune 500 and S&P 500
company headquartered in Grapevine, Texas, is a global,
multichannel video game, consumer electronics and wireless services
retailer. GameStop operates more than 6,600 stores across 15
countries. The company’s consumer product network also includes
www.gamestop.com; www.Kongregate.com, a leading browser-based game
site; Game Informer® magazine, the world’s leading print and
digital video game publication; www.buymytronics.com, an online
consumer electronics trade-in platform; Simply Mac, the largest
certified retailer of Apple’s full line of products; and Spring
Mobile, an authorized dealer of AT&T wireless services.
General information about GameStop Corp. can be obtained at the
company's corporate website. Follow GameStop on Twitter @
www.twitter.com/GameStop and find GameStop on Facebook @
www.facebook.com/GameStop.
Safe Harbor
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Such statements may include, but are not limited to, the
outlook for the first quarter and fiscal 2014, future financial and
operating results, projected store openings, the company's plans,
objectives, expectations and intentions, and other statements that
are not historical facts. Such statements are based upon the
current beliefs and expectations of GameStop's management and are
subject to significant risks and uncertainties. Actual results may
differ from those set forth in the forward-looking statements.
GameStop undertakes no obligation to publicly update or revise any
forward-looking statements. The following factors, among others,
could cause actual results to differ from those set forth in the
forward-looking statements: the inability to obtain sufficient
quantities of product to meet consumer demand, including console
hardware and accessories; the timing of release of video game
titles for current generation consoles; the risks associated with
expanded international operations and the integration of
acquisitions; the impact of increased competition and changing
technology in the video game industry, including browser and mobile
games and alternative methods of distribution; and economic,
regulatory and other events, including litigation, that could
reduce or impact consumer demand or affect the company’s business.
Additional factors that could cause GameStop's results to differ
materially from those described in the forward-looking statements
can be found in GameStop's Annual Report on Form 10-K for the
fiscal year ended Feb. 2, 2013 filed with the SEC and available at
the SEC's Internet site at http://www.sec.gov or
http://investor.GameStop.com.
GameStop Corp.
Condensed Consolidated Statements of Operations (in
millions, except per share data) (unaudited) 13
weeks 14 weeks ended ended February 1, 2014 February 2, 2013
Net sales $ 3,683.8 $ 3,561.5 Cost of sales 2,680.8
2,586.6 Gross profit 1,003.0 974.9
Selling, general and administrative expenses 573.1 516.6
Depreciation and amortization 42.8 44.1 Goodwill impairments 10.2 -
Asset impairments and restructuring
charges
18.5 1.9 Operating earnings
358.4 412.3 Interest expense, net 1.8
1.0 Earnings before income tax expense 356.6
411.3 Income tax expense 136.1 150.2
Net income attributable to GameStop Corp. $ 220.5
$ 261.1 Net income per common share: Basic1 $
1.91 $ 2.17 Diluted1 $ 1.89 $ 2.15 Dividends per common
share $ 0.275 $ 0.25 Weighted average common shares
outstanding: Basic 115.7 120.4 Diluted 116.9 121.5
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 72.8 %
72.6 % Gross profit 27.2 % 27.4 % Selling, general
and administrative expenses 15.5 % 14.5 % Depreciation and
amortization 1.2 % 1.2 % Goodwill impairments 0.3 % 0.0 %
Asset impairments and restructuring
charges
0.5 % 0.1 % Operating earnings 9.7 % 11.6 %
Interest expense, net 0.0 % 0.0 %
Earnings before income tax expense 9.7 % 11.6 %
Income tax expense 3.7 % 4.3 % Net income
attributable to GameStop Corp. 6.0 % 7.3 %
1 Basic and diluted net income per share are calculated based on
net income attributable to GameStop Corp.
GameStop Corp.
Condensed Consolidated Statements of Operations (in
millions, except per share data) (unaudited) 52
weeks 53 weeks ended ended February 1, 2014 February 2, 2013
Net sales $ 9,039.5 $ 8,886.7 Cost of sales 6,378.4
6,235.2 Gross profit 2,661.1 2,651.5
Selling, general and administrative expenses 1,892.4 1,835.9
Depreciation and amortization 166.5 176.5 Goodwill impairments 10.2
627.0 Asset impairments and restructuring charges 18.5
53.7 Operating earnings (loss) 573.5
(41.6
)
Interest expense, net 4.7 3.3
Earnings (loss) before income tax expense 568.8
(44.9
)
Income tax expense 214.6 224.9
Consolidated net income (loss) 354.2
(269.8
)
Net loss attributable to noncontrolling interests -
0.1 Net income (loss) attributable to GameStop Corp.
$ 354.2 $
(269.7
)
Net income (loss) per common share: Basic1 $ 3.02 $ (2.13 )
Diluted1 $ 2.99 $ (2.13 ) Dividends per common share $ 1.10
$ 0.80 Weighted average common shares outstanding: Basic
117.2 126.4 Diluted 118.4 126.4
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 70.6 %
70.2 % Gross profit 29.4 % 29.8 % Selling, general
and administrative expenses 21.0 % 20.7 % Depreciation and
amortization 1.8 % 2.0 % Goodwill impairments 0.1 % 7.0 %
Asset impairments and restructuring
charges
0.2 % 0.6 % Operating earnings (loss) 6.3 %
(0.5
%)
Interest expense, net 0.0 % 0.0 %
Earnings (loss) before income tax expense 6.3 %
(0.5
%)
Income tax expense 2.4 % 2.5 % Consolidated
net income (loss) 3.9 %
(3.0
%)
Net loss attributable to noncontrolling interests 0.0
% 0.0 %
Net income (loss) attributable to GameStop
Corp.
3.9
%
(3.0
%)
1 Basic and diluted net income per share are calculated based on
consolidated net income (loss) attributable to GameStop Corp.
GameStop Corp.
Condensed Consolidated Balance Sheets (in millions)
(unaudited) February 1, February 2, 2014 2013
ASSETS: Current assets: Cash and cash equivalents $ 536.2 $
374.4 Receivables, net 84.4 73.6 Merchandise inventories, net
1,198.9 1,171.3 Prepaid expenses and other current assets 78.4 68.5
Deferred income taxes 51.7 61.7 Total current assets
1,949.6 1,749.5 Property and equipment: Land
20.4 22.5 Buildings & leasehold improvements 609.6 606.4
Fixtures and equipment 841.8 926.0 Total property and
equipment 1,471.8 1,554.9
Less accumulated depreciation and
amortization
995.6 1,030.1 Net property and equipment 476.2
524.8 Goodwill 1,414.7 1,383.1 Other noncurrent
assets 250.9 214.8 Total assets $ 4,091.4 $ 3,872.2
LIABILITIES AND STOCKHOLDERS' EQUITY: Current
liabilities: Accounts payable $ 783.9 $ 611.6 Accrued liabilities
942.1 842.3 Total current liabilities 1,726.0 1,453.9
Other long-term liabilities 114.0 132.0
Total liabilities 1,840.0 1,585.9 Stockholders' equity
2,251.4 2,286.3 Total liabilities and stockholders'
equity $ 4,091.4 $ 3,872.2
GameStop Corp.
Schedule I Sales Mix (unaudited) 13
Weeks Ended 14 Weeks Ended Feb. 1, 2014 Feb.
2, 2013 Net Percent Net Percent
Sales of Total Sales of Total Net Sales
(in millions): New video game hardware $ 1,158.6 31.5 % $
616.7 17.3 % New video game software 1,214.7 33.0 % 1,607.7 45.1 %
Pre-owned and value video game products 741.9 20.1 % 752.8 21.1 %
Video game accessories 244.2 6.6 % 255.4 7.2 % Digital 66.1 1.8 %
69.9 2.0 % Mobile and consumer electronics 136.1 3.7 % 109.2 3.1 %
Other 122.2 3.3 % 149.8 4.2 % Total $
3,683.8 100.0 % $ 3,561.5 100.0 %
52 Weeks
Ended 53 Weeks Ended Feb. 1, 2014 Feb. 2,
2013 Net Percent Net Percent
Sales of Total Sales of Total Net Sales
(in millions): New video game hardware $ 1,730.0 19.1 % $
1,333.4 15.0 % New video game software 3,480.9 38.5 % 3,582.4 40.3
% Pre-owned and value video game products 2,329.8 25.8 % 2,430.5
27.4 % Video game accessories 560.6 6.2 % 611.8 6.9 % Digital 217.7
2.4 % 208.4 2.3 % Mobile and consumer electronics 303.7 3.4 % 200.3
2.3 % Other 416.8 4.6 % 519.9 5.8 %
Total $ 9,039.5 100.0 % $ 8,886.7 100.0 %
Schedule II Gross
Profit Mix (unaudited) 13 Weeks Ended
14 Weeks Ended Feb. 1, 2014
Feb. 2, 2013
Gross Gross Gross Profit Gross
Profit Profit Percent Profit
Percent Gross Profit (in millions): New video
game hardware $ 127.0 11.0 % $ 43.6 7.1 % New video game software
309.1 25.4 % 353.7 22.0 % Pre-owned and value video game products
355.9 48.0 % 356.4 47.3 % Video game accessories 94.2 38.6 % 97.7
38.3 % Digital 45.0 68.1 % 43.7 62.5 % Mobile and consumer
electronics 26.9 19.8 % 23.5 21.5 % Other 44.9 36.7 % 56.3 37.6 %
Total $ 1,003.0 27.2 % $ 974.9 27.4 %
52 Weeks Ended 53 Weeks Ended Feb. 1, 2014
Feb. 2, 2013 Gross Gross Gross
Profit Gross Profit Profit
Percent Profit Percent Gross Profit (in
millions): New video game hardware $ 176.5 10.2 % $ 101.7
7.6 % New video game software 805.3 23.1 % 786.3 21.9 % Pre-owned
and value video game products 1,093.9 47.0 % 1,170.1 48.1 % Video
game accessories 220.5 39.3 % 237.9 38.9 % Digital 149.2 68.5 %
120.9 58.0 % Mobile and consumer electronics 65.1 21.4 % 41.3 20.6
% Other 150.6 36.1 % 193.3 37.2 % Total $ 2,661.1
29.4 % $ 2,651.5 29.8 %
GameStop Corp.
Schedule III (unaudited)
Non-GAAP
results
The following table reconciles the
company's net income and earnings per share as presented in its
audited Consolidated Statements of Operations and prepared in
accordance with Generally Accepted Accounting Principles ("GAAP")
to its non-GAAP net income and earnings per share, excluding asset
impairments and changes in management estimates.
13 Weeks
Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks
Ended Feb. 1, 2014 Feb. 2, 2013 Feb. 1,
2014 Feb. 2, 2013 GAAP Net Income (loss) $ 220.5
$ 261.1 $ 354.2 $ (269.7 ) Goodwill impairments 10.2 - 10.2
627.0 Intangible asset impairments 1.3 - 1.3 29.4 Property,
equipment & other asset impairments 11.3 1.2 11.3 16.3 Change
in customer liabilities (20.9 ) - (20.9 ) -
Non-GAAP Net Income $ 222.4 $ 262.3 $ 356.1
$ 403.0
Non-GAAP earnings per share
Basic $ 1.92 $ 2.18 $ 3.04 $ 3.19 Diluted $ 1.90 $ 2.16 $ 3.01 $
3.17 Number of shares used in non-GAAP calculation Basic
115.7 120.4 117.2 126.4 Diluted 116.9 121.5 118.4 127.1
Matt HodgesVice President,Public and Investor RelationsGameStop
Corp.(817) 424-2130
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