New hardware sales increase 147.4%
Digital receipts rise 52.4%
2014 Full Year Guidance Range Narrowed to $3.40
to $3.55; Indicates 13.5% to 18.5% Growth for 2014
GameStop Corp. (NYSE: GME), a family of specialty retail brands
that makes the most popular technologies affordable and simple,
today reported sales and earnings for the third quarter ended
November 1, 2014.
Third Quarter Results
Total global sales for the third quarter of 2014 were $2.09
billion, a decline of 0.7% compared to $2.11 billion in the prior
year quarter. Consolidated comparable store sales were -2.3%.
Topline and comparable store sales were negatively impacted by the
delayed release of Assassin’s Creed Unity.
During the quarter, new hardware sales increased 147.4%, greatly
outpacing industry growth of 102.4%. After the first 12 months
since launch, the U.S. installed base of the Sony PlayStation 4 and
Microsoft Xbox One is 73% greater than the PlayStation 3 and Xbox
360 base was over the same period.
The company reached 47.3% new software market share during the
quarter, its second highest ever, despite new software sales
declining 34.4%. The decrease was primarily due to overlapping the
company’s record market share of last year’s AAA titles, such as
Grand Theft Auto V, Battlefield 4, Batman: Arkham Origins, Pokemon
X/Y, and Assassin’s Creed IV: Black Flag.
The pre-owned/value category recorded its third straight quarter
of positive growth, +2.6%, led by consumers discovering value in
the affordably priced pre-owned video game consoles.
Sales in the mobile & consumer electronics category rose
125.0%, led by continued expansion and strong results of Spring
Mobile. The Technology Brands segment contributed 11.0% of the
company’s third quarter operating profit, driven by an 11%
operating margin.
Non-GAAP digital receipts increased 52.4% to $210.3 million, or
$54.9 million of sales on a GAAP basis, led by growth of
downloadable content, platform currency and international digital
sales.
Global multichannel sales (mobile, web-in-store, pick-up at
store, ecommerce) improved 20.1% over last year, led by 91.4%
growth in the pick-up at store program, where customers can hold a
product online and pick it up at a local store. The GameStop mobile
app now has six million installs and 69% of www.gamestop.com’s
visits originate from a mobile phone or tablet.
“Overall, most of our major product categories performed very
well, but our third quarter results were impacted by Assassin’s
Creed Unity moving out of October,” stated Paul Raines, chief
executive officer. “As we look at the holiday quarter, we are
focused on relentlessly applying our competitive advantages:
convenience, strong CRM, knowledgeable associates and value through
our unique forms of currency, which include buy-sell-trade and the
new PowerUp Rewards credit card, to deliver a successful
quarter.”
In the third quarter, as a result of the sale and shutdown of
certain business operations, the company recorded non-recurring
charges of $13.9 million, $7.9 million net of tax benefits, or
$0.07 per share. A reconciliation of non-GAAP adjusted net income
to GAAP net income is included with this release (Schedule
III).
Excluding the one-time charges, GameStop’s adjusted net earnings
for the third quarter were $64.3 million compared to net earnings
of $68.6 million in the prior year quarter. Adjusted diluted
earnings per share were $0.57 compared to adjusted diluted earnings
per share of $0.58 in the prior year quarter.
Including the one-time charges, GameStop’s third quarter net
earnings were $56.4 million compared to net earnings of $68.6
million in the prior year quarter. Diluted earnings per share were
$0.50 compared to diluted earnings per share of $0.58 in the prior
year quarter.
Capital Allocation
Update
During the third quarter of 2014, GameStop repurchased 3.58
million shares at an average price of $40.25, or $144.0 million of
stock, representing the highest amount deployed in a quarter since
the company began its buyback program. Year-to-date, 6.8 million
shares, or $271.7 million of stock, have been repurchased.
Life-to-date, 67.4 million shares have been repurchased at an
average price of $24.36 for a total of $1.64 billion.
In September 2014, the company announced that it had issued $350
million in aggregate principal amount of 5.50% senior notes due
2019 (which represents an upsizing of $100 million). The net
proceeds from the offering were used to pay down the remaining
outstanding balance of its asset-based facility and will be used
for general corporate purposes, which may include acquisitions,
dividends and stock buybacks.
On November 11, 2014, the company announced that its board of
directors approved a new $500 million share repurchase plan,
replacing the remaining $176 million available on the existing
authorization. GameStop’s board of directors also declared a
quarterly cash dividend of $0.33 per common share payable on
December 16, 2014, to shareholders of record as of the close of
business on November 25, 2014.
Earnings Guidance
Based on several titles being moved out of 2014 and the current
sales trends of prior gen software, GameStop is narrowing its
previous guidance. For the fourth quarter of fiscal 2014, GameStop
expects comparable store sales to range from -5.0% to +2.0%.
Diluted earnings per share are expected to range from $2.08 to
$2.24, representing +10.0% to +18.5% growth over the prior year
quarter.
For fiscal year 2014, diluted earnings per share are now
expected to range from $3.40 to $3.55, excluding the non-recurring
charges of $0.07, representing +13.5% to +18.5% growth over the
prior year. Full year comparable store sales are now expected to
range from +2.0% to +5.0%.
Note: Current guidance only includes the effect of the shares
repurchased thus far in fiscal 2014.
Conference Call
Information
A conference call with GameStop Corp.’s management is scheduled
for November 20, 2014 at 4:00 p.m. CST to discuss the company’s
financial results. The phone number for the call is 1-800-499-7921
and the pass code is 3850392. 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.
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 14
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; and www.buymytronics.com, an online
consumer electronics trade-in platform. In addition, our Technology
Brands segment includes our Simply Mac, Spring Mobile and Cricket
stores. Simply Mac, www.simplymac.com, operates 46 stores, selling
the full line of Apple products, including laptops, tablets, and
smartphones and offering Apple certified warranty and repair
services. Spring Mobile, http://springmobile.com, sells post-paid
AT&T services and wireless products through its 311 AT&T
branded stores. Cricket Wireless, www.cricketwireless.com, offers
pre-paid wireless services, devices and related accessories. We
operate 51 Cricket stores in select markets throughout the United
States.
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.
Non-GAAP Measures
As a supplement to our financial results presented in accordance
with U.S. generally accepted accounting principles (GAAP), GameStop
uses certain non-GAAP measures, such as digital receipts, to
provide a clearer perspective of the current operating performance
of the company. GameStop defines digital receipts as the full
amount paid by the customer for digital content at the time of sale
and/or the value attributed to digital content when physical and
digital products are sold combined. Non-GAAP financial measures
should be viewed in addition to, and not as an alternative for, the
company's reported GAAP financial results.
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 fourth 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 international operations, wireless industry 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. 1, 2014 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 13 weeks ended ended
Nov 1, 2014 Nov 2, 2013 Net sales $ 2,092.2 $ 2,106.7 Cost
of sales 1,470.0 1,508.3 Gross
profit 622.2 598.4 Selling, general and administrative
expenses 494.3 448.5 Depreciation and amortization 38.1
40.8 Operating earnings 89.8 109.1
Interest expense, net 3.1 0.7
Earnings before income tax expense 86.7 108.4
Income tax expense 30.3 39.8 Net
income $ 56.4 $ 68.6 Net income per common
share: Basic $ 0.50 $ 0.59 Diluted $ 0.50 $ 0.58 Dividends
per common share $ 0.33 $ 0.275 Weighted average common
shares outstanding: Basic 111.9 116.8 Diluted 112.9 118.1
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 70.3 %
71.6 % Gross profit 29.7 % 28.4 % Selling, general
and administrative expenses 23.6 % 21.3 % Depreciation and
amortization 1.8 % 1.9 % Operating earnings
4.3 % 5.2 % Interest expense, net 0.2 % 0.0 %
Earnings before income tax expense 4.1 % 5.2 %
Income tax expense 1.4 % 1.9 % Net income
2.7 % 3.3 %
GameStop Corp.
Condensed Consolidated Statements of Operations (in
millions, except per share data) (unaudited) 39
weeks 39 weeks ended ended Nov 1, 2014 Nov 2, 2013 Net sales
$ 5,819.9 $ 5,355.7 Cost of sales 4,020.4
3,697.6 Gross profit 1,799.5 1,658.1 Selling,
general and administrative expenses 1,450.7 1,319.3 Depreciation
and amortization 116.4 123.7
Operating earnings 232.4 215.1 Interest expense, net
4.8 2.9 Earnings before income
tax expense 227.6 212.2 Income tax expense 78.6
78.5 Net income $ 149.0 $ 133.7
Net income per common share: Basic $ 1.31 $ 1.14
Diluted $ 1.30 $ 1.12 Dividends per common share $ 0.99 $
0.825 Weighted average common shares outstanding: Basic
113.5 117.7 Diluted 114.4 118.9
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 69.1 %
69.0 % Gross profit 30.9 % 31.0 % Selling, general
and administrative expenses 24.9 % 24.6 % Depreciation and
amortization 2.0 % 2.3 % Operating earnings
4.0 % 4.1 % Interest expense, net 0.1 % 0.1 %
Earnings before income tax expense 3.9 % 4.0 %
Income tax expense 1.3 % 1.5 % Net income
2.6 % 2.5 %
GameStop
Corp. Condensed Consolidated Balance Sheets (in
millions) (unaudited) Nov 1, Nov 2, 2014 2013
ASSETS: Current assets: Cash and cash equivalents $ 374.0 $
471.9 Receivables, net 116.9 88.6 Merchandise inventories, net
1,714.4 1,717.0 Prepaid expenses and other current assets 179.3
125.0 Deferred income taxes 59.1 55.0 Total current
assets 2,443.7 2,457.5 Property and equipment:
Land 20.1 21.3 Buildings & leasehold improvements 625.1 604.0
Fixtures and equipment 890.8 952.9 Total property and
equipment 1,536.0 1,578.2 Less accumulated depreciation and
amortization 1,071.0 1,105.3 Net property and
equipment 465.0 472.9 Goodwill 1,408.5 1,371.4
Other noncurrent assets 324.4 263.2 Total assets $
4,641.6 $ 4,565.0
LIABILITIES AND STOCKHOLDERS'
EQUITY: Current liabilities: Accounts payable $ 1,316.1 $
1,356.6 Accrued liabilities 814.6 959.0 Income taxes payable 16.9 -
Current portion of debt 3.8 - Total current
liabilities 2,151.4 2,315.6 Other long-term
liabilities 131.4 102.1 Long-term debt 350.2 - Total
liabilities 2,633.0 2,417.7 Stockholders' equity
2,008.6 2,147.3 Total liabilities and stockholders' equity $
4,641.6 $ 4,565.0
GameStop Corp.
Schedule I Sales Mix (unaudited)
13 Weeks Ended 13 Weeks Ended Nov 1, 2014
Nov 2, 2013 Net Percent Net
Percent Sales of Total Sales of
Total Net Sales (in millions): New video game hardware $
449.7 21.5 % $ 181.8 8.6 % New video game software 743.7 35.5 %
1,133.1 53.8 % Pre-owned and value video game products 499.3 23.9 %
486.6 23.1 % Video game accessories 132.6 6.4 % 98.0 4.6 % Digital
54.9 2.6 % 46.0 2.2 % Mobile and consumer electronics 126.0 6.0 %
56.0 2.7 % Other 86.0 4.1 % 105.2 5.0 %
Total $ 2,092.2 100.0 % $ 2,106.7 100.0 %
Schedule
II Gross Profit Mix (unaudited) 13
Weeks Ended 13 Weeks Ended Nov 1, 2014 Nov 2,
2013 Gross Gross Gross Profit
Gross Profit Profit Percent
Profit Percent Gross Profit (in millions):
New video game hardware $ 48.4 10.8 % $ 13.7 7.5 % New video
game software 172.7 23.2 % 249.1 22.0 % Pre-owned and value video
game products 237.8 47.6 % 216.6 44.5 % Video game accessories 49.9
37.6 % 38.1 38.9 % Digital 35.2 64.1 % 31.9 69.3 % Mobile and
consumer electronics 50.5 40.1 % 9.3 16.6 % Other 27.7 32.2 % 39.7
37.7 % Total $ 622.2 29.7 % $ 598.4 28.4 %
GameStop Corp.
Schedule III
(in millions)
(unaudited)
Non-GAAP
results
The following table reconciles the
company's net income and earnings per share as presented in its
unaudited Consolidated Statements of Operations and prepared in
accordance with Generally Accepted Accounting Principles ("GAAP")
to its non-GAAP net income and earnings per share, which excludes
the effects of business divestitures.
13 Weeks Ended 13 Weeks Ended 39 Weeks
Ended 39 Weeks Ended Nov. 1, 2014 Nov. 2,
2013 Nov. 1, 2014 Nov. 2, 2013 GAAP Net
Income $ 56.4 $ 68.6 $ 149.0 $ 133.7 Business
divestitures 13.9 - 13.9 - Tax benefit (6.0 ) - (6.0 ) -
Non-GAAP Net Income $ 64.3
$ 68.6 $ 156.9 $ 133.7
Non-GAAP earnings
per share Basic $ 0.57 $ 0.59 $ 1.38 $ 1.14 Diluted $ 0.57 $
0.58 $ 1.37 $ 1.12 Number of shares used in non-GAAP
calculation Basic 111.9 116.8 113.5 117.7 Diluted 112.9 118.1 114.4
118.9
Matt HodgesVice President,Public and Investor RelationsGameStop
Corp.(817) 424-2130
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