News Release

Printer Friendly Version View printer-friendly version
<< Back
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.