GameStop Corp. Comparable Store Sales Up 12 Percent; Video Game Software Sales Increase 36 Percent; Record-Breaking ``Halo 2'' Sales; Raising Full Year Guidance
GRAPEVINE, Texas--(BUSINESS WIRE)--Nov. 15, 2004--GameStop Corp. (NYSE:GME) (NYSE:GME.B), the nation's largest video game and entertainment software specialty retailer, today reported sales and earnings for the third quarter ended Oct. 30, 2004.
GameStop sales increased 28% to $416.7 million in the third quarter of 2004, from $326.0 million in the prior year quarter. Video game software sales were exceptionally strong, growing 36%, with leading titles such as "Madden NFL 2005" from Electronic Arts, Inc., "Grand Theft Auto: San Andreas" from Take-Two Interactive, and "Fable" from Microsoft, Inc. Video game hardware sales were robust with the launch of the newly redesigned PSTwo and the Xbox holiday bundle. Comparable store sales increased a strong 11.8% during the quarter, with new stores, including 72 stores opened during this quarter, also exceeding sales expectations.
Net earnings for the third quarter were $12.1 million, or $0.21 per diluted share, including an after-tax charge of $1.7 million, or $0.03 per diluted share, attributable to professional fees related to the spin-off of GameStop Class B common shares previously owned by Barnes & Noble, Inc. Excluding this after-tax charge, which management views as non-recurring, third quarter earnings of $13.8 million, or $0.24 per diluted share, were significantly above previously released guidance and increased 29% from the prior year quarter, when earnings were $10.7 million, or $0.18 per diluted share.
"Nearly every new game released during the quarter exceeded our expectations, showing the overwhelming demand for video game products and how our new and used model helps us to grow market share and customer demand," said R. Richard Fontaine, Chairman and Chief Executive Officer. "The launch of the new PSTwo in early October, coupled with the late October launch of the Xbox holiday bundle, drove hardware sales far beyond our original projections."
GameStop had a record-breaking sales day on November 9th, with the release of "Halo 2" from Microsoft, Inc. In addition to GameStop surpassing its largest sales day in history, "Halo 2" sold over 525,000 units in 24 hours, setting a new record for sell-through in a single day.
Fontaine continued, "Our initial projections for a strong holiday season seem to be justified by the exceptional acceptance of the video games released thus far in the season, and we are looking forward to an exciting few months and beyond."
Based on the initial momentum seen in the fourth quarter, we are raising guidance for the fourth quarter and full year of 2004. Fourth quarter guidance assumes comparable store sales will range from +6% to +9%, with earnings per diluted share between $0.81 and $0.84. We are also raising our full-year 2004 earnings guidance to between $1.28 and $1.31 per diluted share, before one-time charges.
A conference call with GameStop Corp.'s management will be simulcast on the Web at (http://www.gamestop.com) beginning at 4:00 p.m. ET on Nov. 15, 2004, and will be accessible at (http://www.gamestop.com/investor-relations), where it will be archived until Nov. 29, 2004.
About GameStop Corp.
Headquartered in Grapevine, Texas, GameStop Corp. (NYSE:GME) (NYSE:GME.B) is the nation's largest video game and entertainment software specialty retailer, based on the number of U.S. stores and U.S. revenues. The company operates 1,746 retail stores throughout 49 states, the District of Columbia, Puerto Rico and Ireland, primarily under the GameStop(R) brand. In addition, the company owns a commerce-enabled Web property, GameStop.com, and Game Informer(R) magazine, a leading video and computer game publication.
GameStop Corp. sells the most popular new software, hardware and game accessories for the PC and next generation video game systems from Sony, Nintendo, and Microsoft, and is also the industry's largest reseller of used video games. In addition, the company sells computer and video game magazines and strategy guides, action figures, and other related merchandise to more than 30 million customers.
General information on GameStop Corp. can be obtained via the Internet by visiting the company's corporate Website: http://www.gamestop.com/investor-relations/.
Safe Harbor
This press release (including the attached schedules) contains "forward-looking statements." GameStop Corp. is including this statement for the express purpose of availing itself of the protections of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to all such forward-looking statements. These forward-looking statements are based on currently available information and represent the beliefs of the management of the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks include, but are not limited to, general economic and market conditions, seasonality, decreased consumer demand for the company's products, possible disruptions in the company's computer or telephone systems, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores or the inability to obtain suitable sites for new stores, possible disruptions or delays in successfully transferring the company's headquarters and distribution center to a new facility during 2004 and 2005, higher than anticipated store closing or relocation costs, higher interest rates, the performance of the company's online and other initiatives, the successful integration of acquired businesses, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, product shortages, and other factors which may be outside of the company's control. In addition, the video game industry has historically been cyclical in nature and dependent upon the introduction of new generation systems and related interactive software. Please refer to the company's reports on file with the SEC for a more detailed discussion of these and other risks that could cause results to differ materially.
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
13 weeks ended 13 weeks ended
October 30, 2004 November 1, 2003
---------------- ----------------
Sales $416,737 $326,042
Cost of sales 296,407 227,568
---------------- ----------------
Gross profit 120,330 98,474
Selling, general and administrative
expenses 91,136 72,865
Depreciation and amortization 9,342 7,718
---------------- ----------------
Operating earnings 19,852 17,891
Interest expense (income), net 94 (62)
---------------- ----------------
Earnings before income tax expense 19,758 17,953
Income tax expense 7,699 7,260
---------------- ----------------
Net earnings $12,059 $10,693
================ ================
Earnings per common share:
Basic $0.22 $0.19
Diluted $0.21 $0.18
Weighted average common shares
outstanding:
Basic 54,334 55,767
Diluted 57,367 59,431
Percentage of sales:
------------------------------------
Sales 100.0% 100.0%
Cost of sales 71.1% 69.8%
---------------- ----------------
Gross profit 28.9% 30.2%
SG&A expenses 21.9% 22.3%
Depreciation and amortization 2.2% 2.4%
---------------- ----------------
Operating earnings 4.8% 5.5%
Interest expense (income), net 0.1% --
---------------- ----------------
Earnings before income tax expense 4.7% 5.5%
Income tax expense 1.8% 2.2%
---------------- ----------------
Net earnings 2.9% 3.3%
================ ================
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
39 weeks ended 39 weeks ended
October 30, 2004 November 1, 2003
----------------- -----------------
Sales $1,134,066 $953,457
Cost of sales 800,989 680,559
----------------- -----------------
Gross profit 333,077 272,898
Selling, general and
administrative expenses 263,727 212,662
Depreciation and amortization 26,183 20,807
----------------- -----------------
Operating earnings 43,167 39,429
Interest expense (income), net (253) (648)
----------------- -----------------
Earnings before income tax expense 43,420 40,077
Income tax expense 17,011 16,167
----------------- -----------------
Net earnings $26,409 $23,910
================= =================
Earnings per common share:
Basic $0.47 $0.42
Diluted $0.45 $0.40
Weighted average common shares
outstanding:
Basic 55,981 56,538
Diluted 59,010 59,953
Percentage of sales:
----------------------------------
Sales 100.0% 100.0%
Cost of sales 70.6% 71.4%
----------------- -----------------
Gross profit 29.4% 28.6%
SG&A expenses 23.3% 22.3%
Depreciation and amortization 2.3% 2.2%
----------------- -----------------
Operating earnings 3.8% 4.1%
Interest expense (income), net -- (0.1)%
----------------- -----------------
Earnings before income tax expense 3.8% 4.2%
Income tax expense 1.5% 1.7%
----------------- -----------------
Net earnings 2.3% 2.5%
================= =================
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
October 30, November 1,
2004 2003
------------- -------------
ASSETS:
Current assets:
Cash and cash equivalents $101,563 $91,577
Receivables, net 10,490 8,013
Merchandise inventories 274,752 309,691
Prepaid expenses and other current
assets 14,987 10,964
Prepaid taxes 12,047 16,798
Deferred taxes 7,661 6,034
------------- -------------
Total current assets 421,500 443,077
------------- -------------
Property and equipment:
Land 2,000 --
Leasehold improvements 87,484 52,287
Fixtures and equipment 169,543 124,498
------------- -------------
259,027 176,785
Less accumulated depreciation and
amortization 109,435 76,067
------------- -------------
Net property and equipment 149,592 100,718
------------- -------------
Goodwill, net 320,888 320,826
Other noncurrent assets 1,849 1,401
------------- -------------
Total assets $893,829 $866,022
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $190,657 $239,184
Accrued liabilities 104,348 75,334
Note payable, current portion 49,673 --
------------- -------------
Total current liabilities 344,678 314,518
Deferred taxes 17,820 5,574
Other long-term liabilities 3,364 3,314
Note payable, long-term portion 24,347 --
------------- -------------
Total liabilities 390,209 323,406
------------- -------------
Stockholders' equity:
Preferred stock -- authorized 5,000
shares; no shares issued or outstanding -- --
Class A common stock -- $.001 par value;
authorized 300,000 shares; 23,844 and
21,674 shares issued and outstanding,
respectively 24 22
Class B common stock -- $.001 par value;
authorized 100,000 shares; 29,902 and
36,009 shares issued and outstanding,
respectively 30 36
Additional paid-in-capital 496,025 499,059
Accumulated other comprehensive income
(loss) 437 (25)
Retained earnings 57,104 78,530
Treasury stock, at cost, 3,263 and 2,304
shares, respectively (50,000) (35,006)
------------- -------------
Total stockholders' equity 503,620 542,616
------------- -------------
Total liabilities and stockholders'
equity $893,829 $866,022
============= =============
Schedule I
GameStop Corp.
Retail Sales Mix
13 weeks 13 weeks
ended ended
October 30, 2004 November 1, 2003
----------------- -----------------
Video Game Hardware 13% 15%
Video Game Software 70% 65%
Video Game Accessories 10% 10%
PC Software 5% 7%
PC Accessories and Other 2% 3%
Schedule II
GameStop Corp.
Reconciliation of Spin-Off Professional Fees Charge
(in thousands, except per share data)
13 Weeks Ended Percentage
October 30, 2004 Of Sales
------------------- ------------------
Selling, general and
administrative expenses $91,136 21.9%
Less: Spin-off professional
fees (2,800) (0.7%)
------------------- ------------------
Selling, general and
administrative expenses
excluding spin-off
professional fees $88,336 21.2%
=================== ==================
Operating earnings $19,852 4.8%
Add: Spin-off professional fees 2,800 0.6%
------------------- ------------------
Operating earnings excluding
spin-off professional fees $22,652 5.4%
=================== ==================
Net earnings $12,059 2.9%
Add: After-tax spin-off
professional fees 1,739 0.4%
------------------- ------------------
Net earnings excluding spin-off
professional fees $13,798 3.3%
=================== ==================
Net earnings per common share
-- diluted $0.21
Add: After-tax spin-off
professional fees per common
share -- diluted $0.03
-------------------
Net earnings excluding spin-off
professional fees per common
share -- diluted $0.24
===================
CONTACT: GameStop Corp., Grapevine
Lori M. Milovich, 817-424-2130
Director, Public & Investor Relations
or
Investor Contact:
David W. Carlson, 817-424-2130
Executive Vice President & Chief Financial Officer
SOURCE: GameStop Corp.