GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today reported sales and earnings results for the third quarter ended October 31, 2009.
Total company sales in the quarter were $1.83 billion, an 8.2% increase as compared to sales of $1.70 billion in the prior year quarter. New software sales grew 9.4%, advancing our new video game market share by 150 basis points over last year. Used product sales increased 19.4%, on top of the 19.3% increase in the third quarter of 2008. Comparable store sales decreased 7.8%, attributable primarily to a decline in new video game hardware sales.
The top five selling games during the quarter were Electronic Arts’ Madden NFL 10, Microsoft’s Halo 3: ODST, Warner Home Video Games’ Batman: Arkham Asylum, 2K Sports’ NBA 2K10 and Nintendo’s Wii Sports Resort. Each of these new games was well received by consumers and met or exceeded our initial sales expectations.
Net earnings for the quarter were $52.2 million, including $2.5 million of debt retirement costs ($1.6 million net of tax benefits). This represents an 11.8% increase as compared to net earnings of $46.7 million in the prior year period, including merger-related costs of $16.6 million ($10.5 million net of tax benefits). Diluted earnings per share were $0.31, including $0.01 of debt retirement cost, compared to $0.28 in the prior year quarter, including merger-related costs of $0.06 per diluted share.
Daniel DeMatteo, GameStop Chief Executive Officer, stated, “A sharp focus on efficient operations in this challenging global economy delivered solid earnings results and significant market share gains. Gross margins expanded, led by a sequential 150 basis point improvement in the used category. Store foot traffic increased from the prior quarter, driven by strong new title releases and price cuts on all current generation platforms.
“The holiday season has started strong. In the first 72 hours of its release, GameStop sold over 2.5 million copies worldwide of Call of Duty: Modern Warfare 2. We are optimistic that the huge success of this game will serve as a bellwether for what we can expect for the remainder of our holiday game sales.
“We know consumers are looking for value in these difficult economic times. Our stores are prepared to deliver this holiday with the broadest selection of new and used games, the most knowledgeable gaming associates and the buy-sell-trade model, which offers affordable choices that meet the needs of all types of gaming customers.”
Updated Guidance
Based on strong initial results of the new software titles released earlier this month, such as Call of Duty: Modern Warfare 2 from Activision, New Super Mario Bros. from Nintendo and Ubisoft’s Assassin’s Creed 2, we expect a solid fourth quarter in sales and earnings.
For the fourth quarter of fiscal 2009, GameStop is reaffirming guidance of diluted earnings per share to range from $1.47 to $1.65, as compared to $1.39 in the prior year period. Comparable store sales are projected to range from -7.0% to -1.0%.
Full year diluted earnings per share are forecast to range from $2.45 to $2.63, representing annual EPS growth of +2% to +10%. Comparable store sales are projected to range from -7.0% to -4.0% for the full year.
Note that guidance does not include debt retirement costs or merger-related expenses.
Conference Call and Webcast Information
A conference call with GameStop Corp.’s management is scheduled for November 19, 2009 at 11:00 AM ET to discuss the third quarter sales and earnings results. The conference call will be simulcast on the Internet at http://investor.gamestop.com. The conference call will be archived on the website until December 3, 2009.
About GameStop
Headquartered in Grapevine, TX, GameStop Corp., a Fortune 500 and S&P 500 company, is the world's largest video game and entertainment software retailer. The company operates 6,391 retail stores in 17 countries worldwide. The company also operates an e-commerce site, GameStop.com, and publishes Game Informer(R) magazine, a leading multi-platform video game publication. GameStop Corp. sells new and used video game software, hardware and accessories for video game systems from Sony, Nintendo, and Microsoft. In addition, the company sells PC entertainment software, related accessories and other merchandise. General information on GameStop Corp. can be obtained at the company's corporate website: http://www.gamestopcorp.com.
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 year 2009, future financial and operating results, 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; the timing of release of video game titles for next generation consoles; the risks associated with expanded international operations and the integration of recent acquisitions, including Micromania; the impact of increased competition and changing technology in the video game industry; and economic and other events that could reduce or impact consumer demand. 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 January 31, 2009, filed with the SEC and available at the SEC's Internet site at http://www.sec.gov or http://investor.gamestop.com.
| GameStop Corp. | ||||||||
| Statements of Operations | ||||||||
| (in thousands, except per share data) | ||||||||
| 13 weeks | 13 weeks | |||||||
| ended | ended | |||||||
| Oct. 31, 2009 | Nov. 1, 2008 | |||||||
| Sales | $ | 1,834,727 | $ | 1,695,746 | ||||
| Cost of sales | 1,311,643 | 1,222,317 | ||||||
| Gross profit | 523,084 | 473,429 | ||||||
| Selling, general and administrative | ||||||||
| expenses | 391,210 | 335,722 | ||||||
| Depreciation and amortization | 41,605 | 35,767 | ||||||
| Merger-related expenses | 0 | 16,605 | ||||||
| Operating earnings | 90,269 | 85,335 | ||||||
| Interest expense, net | 10,466 | 8,807 | ||||||
| Debt extinguishment expense | 2,461 | 0 | ||||||
| Earnings before income | ||||||||
| tax expense | 77,342 | 76,528 | ||||||
| Income tax expense | 25,117 | 29,859 | ||||||
| Net earnings | $ | 52,225 | $ | 46,669 | ||||
| Earnings per common share: | ||||||||
| Basic | $ | 0.32 | $ | 0.29 | ||||
| Diluted | $ | 0.31 | $ | 0.28 | ||||
| Weighted average common shares | ||||||||
| outstanding: | ||||||||
| Basic | 164,702 | 163,736 | ||||||
| Diluted | 168,113 | 167,995 | ||||||
Percentage of Sales: | ||||||||
| Sales | 100.0 | % | 100.0 | % | ||||
| Cost of sales | 71.5 | % | 72.1 | % | ||||
| Gross profit | 28.5 | % | 27.9 | % | ||||
| SG&A expenses | 21.3 | % | 19.8 | % | ||||
| Depreciation and amortization | 2.3 | % | 2.1 | % | ||||
| Merger-related expenses | 0.0 | % | 1.0 | % | ||||
| Operating earnings | 4.9 | % | 5.0 | % | ||||
| Interest expense, net | 0.6 | % | 0.5 | % | ||||
| Debt extinguishment expense | 0.1 | % | 0.0 | % | ||||
| Earnings before income | ||||||||
| tax expense | 4.2 | % | 4.5 | % | ||||
| Income tax expense | 1.4 | % | 1.7 | % | ||||
| Net earnings | 2.8 | % | 2.8 | % | ||||
| GameStop Corp. | ||||||||
| Statements of Operations | ||||||||
| (in thousands, except per share data) | ||||||||
| 39 weeks | 39 weeks | |||||||
| ended | ended | |||||||
| Oct. 31, 2009 | Nov. 1, 2008 | |||||||
| Sales | $ | 5,553,984 | $ | 5,313,783 | ||||
| Cost of sales | 3,993,381 | 3,882,825 | ||||||
| Gross profit | 1,560,603 | 1,430,958 | ||||||
| Selling, general and administrative | ||||||||
| expenses | 1,151,815 | 1,012,134 | ||||||
| Depreciation and amortization | 119,109 | 106,912 | ||||||
| Merger-related expenses | 0 | 16,605 | ||||||
| Operating earnings | 289,679 | 295,307 | ||||||
| Interest expense, net | 33,422 | 26,506 | ||||||
| Debt extinguishment expense | 5,323 | 2,331 | ||||||
| Earnings before income | ||||||||
| tax expense | 250,934 | 266,470 | ||||||
| Income tax expense | 89,591 | 100,513 | ||||||
| Net earnings | $ | 161,343 | $ | 165,957 | ||||
| Earnings per common share: | ||||||||
| Basic | $ | 0.98 | $ | 1.02 | ||||
| Diluted | $ | 0.96 | $ | 0.99 | ||||
| Weighted average common shares | ||||||||
| outstanding: | ||||||||
| Basic | 164,604 | 162,983 | ||||||
| Diluted | 167,981 | 167,813 | ||||||
Percentage of Sales: | ||||||||
| Sales | 100.0 | % | 100.0 | % | ||||
| Cost of sales | 71.9 | % | 73.1 | % | ||||
| Gross profit | 28.1 | % | 26.9 | % | ||||
| SG&A expenses | 20.7 | % | 19.0 | % | ||||
| Depreciation and amortization | 2.2 | % | 2.0 | % | ||||
| Meger-related expenses | 0.0 | % | 0.3 | % | ||||
| Operating earnings | 5.2 | % | 5.6 | % | ||||
| Interest expense, net | 0.6 | % | 0.5 | % | ||||
| Debt extinguishment expense | 0.1 | % | 0.1 | % | ||||
| Earnings before income | ||||||||
| tax expense | 4.5 | % | 5.0 | % | ||||
| Income tax expense | 1.6 | % | 1.9 | % | ||||
| Net earnings | 2.9 | % | 3.1 | % | ||||
| GameStop Corp. | |||||||
| Balance Sheets | |||||||
| (in thousands, except per share data) | |||||||
| Oct. 31, | Nov. 1, | ||||||
| 2009 | 2008 | ||||||
| ASSETS: | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 292,027 | $ | 478,056 | |||
| Receivables, net | 52,543 | 50,730 | |||||
| Merchandise inventories | 1,733,962 | 1,424,249 | |||||
| Prepaid expenses and other current assets | 91,059 | 170,671 | |||||
| Deferred taxes | 24,503 | 29,200 | |||||
Total current assets | 2,194,094 | 2,152,906 | |||||
| Property and equipment: | |||||||
| Land | 11,819 | 10,229 | |||||
| Buildings & leasehold improvements | 516,492 | 404,660 | |||||
| Fixtures and equipment | 692,660 | 590,565 | |||||
| 1,220,971 | 1,005,454 | ||||||
| Less accumulated depreciation and amortization | 629,276 | 502,348 | |||||
| Net property and equipment | 591,695 | 503,106 | |||||
| Goodwill, net | 1,931,672 | 1,443,782 | |||||
| Other noncurrent assets | 318,547 | 63,907 | |||||
| Total assets | $ | 5,036,008 | $ | 4,163,701 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY: | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 1,328,041 | $ | 1,102,639 | |||
| Accrued liabilities | 510,296 | 366,147 | |||||
Total current liabilities | 1,838,337 | 1,468,786 | |||||
| Other long-term liabilities | 111,127 | 85,273 | |||||
| Senior notes payable, net of discount | 447,121 | 545,462 | |||||
| Total liabilities | 2,396,585 | 2,099,521 | |||||
| Stockholders' equity: | |||||||
| Preferred stock - authorized 5,000 shares; no shares | |||||||
| issued or outstanding | -- | -- | |||||
| Class A common stock - $.001 par value; authorized 300,000 shares; | |||||||
| 164,752 and 163,776 shares issued and outstanding, respectively | 165 | 164 | |||||
| Additional paid-in-capital | 1,334,481 | 1,299,721 | |||||
| Accumulated other comprehensive income (loss) | 122,944 | (23,870 | ) | ||||
| Retained earnings | 1,181,833 | 788,165 | |||||
| Total stockholders' equity | 2,639,423 | 2,064,180 | |||||
| Total liabilities and stockholders' equity | $ | 5,036,008 | $ | 4,163,701 | |||
| Schedule I | ||||||||||||
| GameStop Corp. | ||||||||||||
| Sales Mix | ||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | |||||||||||
| Oct. 31, 2009 | Nov. 1, 2008 | |||||||||||
| Percent | Percent | |||||||||||
| Sales | of Total | Sales | of Total | |||||||||
| Sales (in millions): | ||||||||||||
| New video game hardware | $ | 321.4 | 17.5 | % | $ | 328.4 | 19.3 | % | ||||
| New video game software | 769.4 | 41.9 | % | 703.3 | 41.5 | % | ||||||
| Used video game products | 507.7 | 27.7 | % | 425.1 | 25.1 | % | ||||||
| Other | 236.2 | 12.9 | % | 238.9 | 14.1 | % | ||||||
| Total | $ | 1,834.7 | 100.0 | % | $ | 1,695.7 | 100.0 | % | ||||
| Schedule II | ||||||||||||
| GameStop Corp. | ||||||||||||
| Gross Profit Mix | ||||||||||||
| 13 Weeks Ended | 13 Weeks Ended | |||||||||||
| Oct. 31, 2009 | Nov. 1, 2008 | |||||||||||
| Gross | Gross | |||||||||||
| Gross | Profit | Gross | Profit | |||||||||
| Profit | Percent | Profit | Percent | |||||||||
| Gross Profit (in millions): | ||||||||||||
| New video game hardware | $ | 26.8 | 8.3 | % | $ | 25.4 | 7.7 | % | ||||
| New video game software | 173.8 | 22.6 | % | 158.5 | 22.5 | % | ||||||
| Used video game products | 240.0 | 47.3 | % | 204.8 | 48.2 | % | ||||||
| Other | 82.5 | 34.9 | % | 84.7 | 35.5 | % | ||||||
| Total | $ | 523.1 | 28.5 | % | $ | 473.4 | 27.9 | % | ||||
Contacts:
Chris
Olivera
Vice President,
Corporate Communications
GameStop
Corp.
(817) 424-2130
or
Investor
Contact:
Matt Hodges
Director,
Investor
Relations
GameStop Corp.
(817) 424-2130
