GameStop Corp. (NYSE:GME), today reported sales
and earnings for the first quarter ended May 5, 2018 and announced
changes to its leadership team.
Dan DeMatteo, executive chairman, stated, “Our
team remains focused on improving the fundamentals of our core
businesses in order to drive profitability and we were pleased to
deliver first quarter sales and earnings in line with our
expectations. We continue to expect annual sales and earnings
results for fiscal 2018 to be in line with the guidance we provided
last quarter.”
GameStop also announced today that Shane Kim,
current member of the Company’s Board of Directors and former
Microsoft executive, will serve as interim chief executive officer
until a permanent one is named, and that Rob Lloyd has been
promoted to chief operating officer and chief financial
officer. Dan DeMatteo will continue serving as GameStop’s
executive chairman of the Board.
Mr. DeMatteo said, “We are fortunate to have
Shane assume the role of interim chief executive officer and
welcome his insight as a video game industry veteran. Shane
has been an actively engaged member of GameStop’s board of
directors since 2011 and will bring additional executive focus,
energy and passion to the organization during this time of
transition. As the board conducts its search to fill the
position on a permanent basis, Shane will work closely with Rob,
who has earned a well-deserved promotion as the Company’s chief
operating officer and chief financial officer, and Dan Kaufman, our
executive vice president, chief administrative and legal
officer. Together, Shane, Rob and Dan, along with the other
members of our senior leadership team, will ensure the organization
is focused on driving forward our business strategy and key
priorities. With Shane’s proven track record as a highly
effective leader and Rob’s extensive knowledge of the GameStop
business, we will position each of our businesses to optimize their
operations and profitability over the long-term.”
First Quarter ResultsTotal
global sales decreased 5.5% to $1.93 billion (decreased 7.5%
in constant currency), resulting in a consolidated comparable store
sales decrease of 5.3% (2.6% decrease in the U.S. and 11.6%
decrease internationally). Consistent with the company’s
expectations, new hardware sales decreased 7.9% while new software
sales decreased 10.3%, with each of these categories impacted by
the highly successful launch of the Nintendo Switch in the first
quarter of fiscal 2017. Software sales were further impacted
by the strength of titles across platforms that launched in the
prior fiscal year. Pre-owned sales declined 5.8% and
worldwide omnichannel sales decreased 46.0% due to limited
allocation of the Nintendo Switch at launch, which drove a 92.9%
increase in omnichannel sales in the first quarter of fiscal
2017.
Digital sales and non-GAAP digital receipts
increased 29.6% and 24.2%, respectively, excluding the first
quarter 2017 revenues from Kongregate which was sold in July
2017. On a reported basis, digital sales decreased 2.5% to
$43.0 million, while non-GAAP digital receipts increased 16.2% to
$273.7 million.
Collectibles sales increased 24.4% to $142.4
million, driven by continued expansion of licensed merchandise
offerings and unique product offerings.
Technology Brands sales decreased 16.1% to
$169.0 million, primarily due to less promotional activity and the
overlap of the previously disclosed change in AT&T’s dealer
compensation structure from the previous year. Technology
Brands GAAP operating earnings were $9.8 million. Technology
Brands operating earnings, excluding store closure and other
charges, were $11.2 million compared to $18.4 million in the
prior-year quarter.
GameStop’s first quarter GAAP net income was
$28.2 million, or $0.28 per diluted share, compared to net income
of $59.0 million, or $0.58 per diluted share in the prior-year
quarter. The first quarter results include store closure charges
and other charges related to previously disclosed management
changes of $12.6 million ($10.8 million net of taxes, or $0.11 per
diluted share).
Excluding store closure and other charges,
GameStop's adjusted net income for the first quarter was $39.0
million, compared to adjusted net income of $63.6 million in the
prior-year quarter. Adjusted earnings per diluted share were
$0.38 compared to adjusted earnings per diluted share of $0.63 in
the prior-year quarter.
A reconciliation of non-GAAP results, including
adjusted net income, operating earnings and Technology Brands
operating earnings to its closest GAAP measure is included with
this release (Schedule III).
Capital Allocation UpdateOn May
31, 2018, GameStop announced that its Board of Directors declared a
quarterly cash dividend of $0.38 per common share that is payable
on June 26, 2018 to shareholders of record at the close of business
on June 12, 2018.
2018 GuidanceGameStop is
reiterating its previously issued annual guidance for fiscal 2018
and continues to expect earnings to be substantially back half
weighted for the fiscal year given the overlap of the Nintendo
Switch launch in the first half of the year and expected strength
of the title line up in the second half of the year.
|
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|
Total Sales |
|
|
|
|
|
|
|
|
-2.0% to -6.0% |
|
|
|
|
|
|
|
|
|
|
Comparable Store Sales
(excludes Tech Brands stores) |
|
|
|
|
|
|
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Flat to -5% |
|
|
|
|
|
|
|
|
|
|
Income Tax Rate |
|
|
|
|
|
|
|
|
26.0% to 27.0% |
|
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|
|
|
|
|
|
|
|
Adjusted (Non-GAAP)
Earnings Per Share (diluted) |
|
|
|
|
|
|
|
|
$3.00 to $3.35* |
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures |
|
|
|
|
|
|
|
|
$110.0 million to
$120.0 million |
|
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|
Earnings per share guidance is calculated based
on weighted average shares outstanding of 101.5 million.* A
reconciliation of non-GAAP forward-looking projections to GAAP
financial measures is not available as the nature or amount of
potential adjustments, which may be significant, cannot be
determined at this time.
Conference Call InformationA conference call
with GameStop Corp.’s management is scheduled for May 31, 2018 at
5:00 p.m. ET to discuss the company’s financial results. The phone
number for the call is 866-548-4713 and the passcode is
2306963. This call, along with supplemental information, 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 GameStopGameStop Corp., a Fortune 500
company headquartered in Grapevine, Texas, is a global,
multichannel video game, consumer electronics and wireless services
retailer. GameStop operates over 7,200 stores across 14 countries.
The company's consumer product network also includes
www.gamestop.com; Game Informer® magazine, the world's leading
print and digital video game publication; and ThinkGeek,
www.thinkgeek.com, the premier retailer for the global geek
community featuring exclusive and unique video game and pop culture
products. Our Technology Brands segment includes over 1,300 Spring
Mobile AT&T and Simply Mac stores. Spring Mobile,
www.springmobile.com, sells all of AT&T’s products and
services, including DIRECTV, devices and related accessories in
select markets in the U.S. Simply Mac, www.simplymac.com, sells the
full line of Apple products, including laptops, tablets, and
smartphones and offers Apple certified warranty and repair
services.
General information about GameStop Corp. can be
obtained at the company’s corporate website. Follow @GameStop and
@GameStopCorp on Twitter and find GameStop on Facebook
at www.facebook.com/GameStop.
Non-GAAP MeasuresAs a supplement to our
financial results presented in accordance with U.S. generally
accepted accounting principles (GAAP), GameStop may use certain
non-GAAP measures, such as adjusted operating earnings, adjusted
net income, digital receipts and constant currency. We believe
these non-GAAP financial measures provide useful information to
investors in evaluating our core operating performance. Adjusted
operating earnings and adjusted net income exclude the effect of
items such as asset impairments, store closure costs, severance,
retention compensation, as well as acquisition and divestiture
costs. We define free cash flow as cash flow provided by
operating activities less purchases for property and equipment plus
cash flows from other investing activities, which primarily relate
to tenant allowances. 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. Results reported
as constant currency exclude the impact of fluctuations in foreign
currency exchange rates by converting our local currency financial
results using the prior period exchange rates and comparing these
adjusted amounts to our current period reported results. Our
definition and calculation of non-GAAP measures may differ from
that of other companies. Non-GAAP financial measures should be
viewed in addition to, and not as an alternative for, the company's
reported GAAP financial results.
Safe HarborThis press release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based
upon management’s current beliefs, views, estimates and
expectations, including as to the Company’s industry, business
strategy, goals and expectations concerning its market position,
future operations, margins, profitability, capital expenditures,
liquidity and capital resources and other financial and operating
information. Such statements include without limitation those about
the Company’s outlook for fiscal 2018, future financial and
operating results, projections, expectations and other statements
that are not historical facts. Forward-looking statements are
subject to significant risks and uncertainties and actual results
may differ materially from those reflected or described in the
forward-looking statements. The following factors, among others,
could cause actual results to differ from those reflected or
described in the forward-looking statements: our inability to
obtain sufficient quantities of product to meet consumer demand;
the timing of release and consumer demand for new and pre-owned
products; our ability to continue to expand, and successfully open
and operate new stores for our collectibles and technology brands
businesses; risks associated with achievement of anticipated
financial and operating results from acquisitions; our ability to
sustain and grow our console digital video game sales; the impact
of goodwill and intangible asset impairments; cost reduction
initiatives, including store closing costs; risks related to
changes in, and our continued retention of, executive officers and
other key personnel; changes in consumer preferences and economic
conditions; increased operating costs, including wages; cyber
security events and related costs; risks associated with
international operations; changes to our wireless industry
partnerships and operations; increased competition and changing
technology in the video game industry; changes in domestic or
foreign laws and regulations that reduce consumer demand for, or
increase prices of, our products or otherwise adversely affect our
business; our effective tax rate and the factors affecting our
effective tax rate, including changes in international, federal or
state tax, trade and other laws and regulations; the costs and
outcomes of legal proceedings and tax audits. Additional factors
that could cause our results to differ materially from those
reflected or described in the forward-looking statements can be
found in GameStop's Annual Report on Form 10-K for the fiscal year
ended February 3, 2018 filed with the SEC and available at the
SEC's Internet site at http://www.sec.gov or
http://investor.GameStop.com. Forward-looking statements contained
in this press release speak only as of the date of this release.
The Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by any
applicable securities laws.
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|
GameStop Corp.Condensed
Consolidated Statements of Operations(in millions,
except per share data)(unaudited) |
|
|
|
|
|
|
|
13 weeks ended May 5,
2018 |
|
13 weeks ended April 29,
2017 |
Net sales |
|
$ |
1,934.0 |
|
|
$ |
2,045.9 |
|
Cost of sales |
|
1,276.7 |
|
|
1,343.4 |
|
Gross
profit |
|
657.3 |
|
|
702.5 |
|
Selling, general and
administrative expenses |
|
566.1 |
|
|
563.5 |
|
Depreciation and
amortization |
|
34.1 |
|
|
37.9 |
|
Operating
earnings |
|
57.1 |
|
|
101.1 |
|
Interest expense,
net |
|
13.7 |
|
|
13.9 |
|
Earnings
before income tax expense |
|
43.4 |
|
|
87.2 |
|
Income tax expense |
|
15.2 |
|
|
28.2 |
|
Net
income |
|
$ |
28.2 |
|
|
$ |
59.0 |
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
Basic |
|
$ |
0.28 |
|
|
$ |
0.58 |
|
Diluted |
|
$ |
0.28 |
|
|
$ |
0.58 |
|
|
|
|
|
|
Dividends per common
share |
|
$ |
0.38 |
|
|
$ |
0.38 |
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
Basic |
|
101.8 |
|
|
101.3 |
|
Diluted |
|
102.0 |
|
|
101.4 |
|
|
|
|
|
|
|
|
|
|
|
Percentage of Net
Sales: |
|
|
|
|
|
|
|
|
|
Net sales |
|
100.0 |
% |
|
100.0 |
% |
Cost of sales |
|
66.0 |
% |
|
65.7 |
% |
Gross
profit |
|
34.0 |
% |
|
34.3 |
% |
Selling, general and
administrative expenses |
|
29.2 |
% |
|
27.5 |
% |
Depreciation and
amortization |
|
1.8 |
% |
|
1.9 |
% |
Operating
earnings |
|
3.0 |
% |
|
4.9 |
% |
Interest expense,
net |
|
0.7 |
% |
|
0.6 |
% |
Earnings
before income tax expense |
|
2.3 |
% |
|
4.3 |
% |
Income tax expense |
|
0.8 |
% |
|
1.4 |
% |
Net
income |
|
1.5 |
% |
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
GameStop Corp.Condensed
Consolidated Balance Sheets(in
millions)(unaudited) |
|
|
|
|
|
|
|
May 5, 2018 |
|
April 29, 2017 |
ASSETS: |
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
247.2 |
|
|
$ |
311.9 |
|
Receivables, net |
|
156.4 |
|
|
172.5 |
|
Merchandise inventories, net |
|
1,306.1 |
|
|
1,216.9 |
|
Prepaid
expenses and other current assets |
|
141.9 |
|
|
145.7 |
|
Total
current assets |
|
1,851.6 |
|
|
1,847.0 |
|
Property and
equipment: |
|
|
|
|
Land |
|
19.2 |
|
|
18.6 |
|
Buildings
and leasehold improvements |
|
728.4 |
|
|
727.4 |
|
Fixtures
and equipment |
|
964.8 |
|
|
938.4 |
|
Total
property and equipment |
|
1,712.4 |
|
|
1,684.4 |
|
Less
accumulated depreciation |
|
1,300.3 |
|
|
1,230.8 |
|
Net
property and equipment |
|
412.1 |
|
|
453.6 |
|
Goodwill |
|
1,659.2 |
|
|
1,724.9 |
|
Other noncurrent
assets |
|
385.5 |
|
|
657.9 |
|
Total
assets |
|
$ |
4,308.4 |
|
|
$ |
4,683.4 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
551.4 |
|
|
$ |
526.1 |
|
Accrued
liabilities |
|
600.6 |
|
|
845.4 |
|
Income
taxes payable |
|
62.7 |
|
|
94.1 |
|
Total
current liabilities |
|
1,214.7 |
|
|
1,465.6 |
|
Other long-term
liabilities |
|
91.6 |
|
|
133.2 |
|
Long-term debt,
net |
|
818.6 |
|
|
815.7 |
|
Total
liabilities |
|
2,124.9 |
|
|
2,414.5 |
|
Stockholders’
equity |
|
2,183.5 |
|
|
2,268.9 |
|
Total liabilities and
stockholders’ equity |
|
$ |
4,308.4 |
|
|
$ |
4,683.4 |
|
|
|
|
|
|
GameStop Corp.Schedule
ISales
Mix(unaudited) |
|
|
|
|
|
|
|
13 Weeks Ended |
|
13 Weeks Ended |
|
|
May 5, 2018 |
|
April 29, 2017 |
|
|
Net |
|
Percent |
|
Net |
|
Percent |
Net Sales (in
millions): |
|
Sales |
|
of Total |
|
Sales |
|
of Total |
|
|
|
|
|
|
|
|
|
New video game
hardware |
|
$ |
359.2 |
|
|
18.6 |
% |
|
$ |
389.9 |
|
|
19.1 |
% |
New video game
software |
|
466.7 |
|
|
24.1 |
% |
|
520.5 |
|
|
25.4 |
% |
Pre-owned and value
video game products |
|
495.7 |
|
|
25.6 |
% |
|
526.2 |
|
|
25.7 |
% |
Video game
accessories |
|
199.1 |
|
|
10.3 |
% |
|
176.1 |
|
|
8.6 |
% |
Digital |
|
43.0 |
|
|
2.2 |
% |
|
44.1 |
|
|
2.2 |
% |
Technology Brands |
|
169.0 |
|
|
8.7 |
% |
|
201.4 |
|
|
9.8 |
% |
Collectibles |
|
142.4 |
|
|
7.4 |
% |
|
114.5 |
|
|
5.6 |
% |
Other |
|
58.9 |
|
|
3.1 |
% |
|
73.2 |
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,934.0 |
|
|
100.0 |
% |
|
$ |
2,045.9 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
Schedule IIGross Profit
Mix(unaudited) |
|
|
|
|
|
|
|
13 Weeks Ended |
|
13 Weeks Ended |
|
|
May 5, 2018 |
|
April 29, 2017 |
Gross Profit (in
millions): |
|
GrossProfit |
|
GrossProfitPercent |
|
Gross Profit |
|
Gross Profit Percent |
|
|
|
|
|
|
|
|
|
New video game
hardware |
|
$ |
35.2 |
|
|
9.8 |
% |
|
$ |
38.1 |
|
|
9.8 |
% |
New video game
software |
|
98.8 |
|
|
21.2 |
% |
|
113.7 |
|
|
21.8 |
% |
Pre-owned and value
video game products |
|
220.6 |
|
|
44.5 |
% |
|
253.7 |
|
|
48.2 |
% |
Video game
accessories |
|
67.5 |
|
|
33.9 |
% |
|
55.9 |
|
|
31.7 |
% |
Digital |
|
38.2 |
|
|
88.8 |
% |
|
36.1 |
|
|
81.9 |
% |
Technology Brands |
|
131.6 |
|
|
77.9 |
% |
|
144.6 |
|
|
71.8 |
% |
Collectibles |
|
45.8 |
|
|
32.2 |
% |
|
35.2 |
|
|
30.7 |
% |
Other |
|
19.6 |
|
|
33.3 |
% |
|
25.2 |
|
|
34.4 |
% |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
657.3 |
|
|
34.0 |
% |
|
$ |
702.5 |
|
|
34.3 |
% |
|
|
|
|
|
GameStop Corp.Schedule
III(in millions, except per share
data)(unaudited) |
|
|
|
|
|
Non-GAAP resultsThe following table reconciles the
Company's operating earnings, 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 adjusted operating earnings, net income
and earnings per share. |
|
|
|
13 Weeks Ended |
|
13 Weeks Ended |
|
|
May 5, 2018 |
|
April 29, 2017 |
Technology
Brands Adjusted Operating Earnings |
|
|
|
|
Technology Brands
operating earnings |
|
$ |
9.8 |
|
|
$ |
11.1 |
|
Store
closure costs |
|
1.4 |
|
|
7.3 |
|
Technology Brands
adjusted operating earnings |
|
$ |
11.2 |
|
|
$ |
18.4 |
|
|
|
|
|
|
Consolidated
Adjusted Operating Earnings |
|
|
|
|
Operating earnings |
|
$ |
57.1 |
|
|
$ |
101.1 |
|
Store
closure costs |
|
1.4 |
|
|
7.3 |
|
Severance
and other |
|
11.2 |
|
|
— |
|
Adjusted operating
earnings |
|
$ |
69.7 |
|
|
$ |
108.4 |
|
|
|
|
|
|
Consolidated
Adjusted Net Income |
|
|
|
|
Net Income |
|
$ |
28.2 |
|
|
$ |
59.0 |
|
Store
closure costs |
|
1.4 |
|
|
7.3 |
|
Severance
and other |
|
11.2 |
|
|
— |
|
Tax
effect of non-GAAP adjustments |
|
(1.8 |
) |
|
(2.7 |
) |
Adjusted net
income |
|
$ |
39.0 |
|
|
$ |
63.6 |
|
|
|
|
|
|
Adjusted
Earnings Per Share |
|
|
|
|
Basic |
|
$ |
0.38 |
|
|
$ |
0.63 |
|
Diluted |
|
$ |
0.38 |
|
|
$ |
0.63 |
|
|
|
|
|
|
Number of shares used
in adjusted calculation |
|
|
|
|
Basic |
|
101.8 |
|
|
101.3 |
|
Diluted |
|
102.0 |
|
|
101.4 |
|
Contact
Mike Loftus
Vice President, Global Controller and Investor Relations
GameStop Corp.
investorrelations@gamestop.com
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