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GameStop Corp. Reports 13.6% Increase in Holiday Sales; Video Game Software Grows 15%; Hardware Shortages Impact Fourth Quarter Sales and Earnings

GRAPEVINE, Texas--(BUSINESS WIRE)--Jan. 6, 2005--GameStop Corp. (NYSE:GME) (NYSE:GME.B), the nation's largest video game and entertainment software specialty retailer, today reported sales results for the nine-week holiday period ending January 1, 2005.

Total sales for the nine weeks ended January 1, 2005, totaled $577.7 million, a 13.6% increase from the prior year holiday period of $508.6 million. Comparable store sales increased 0.9% for the same period, as video game software sales grew 15%.

Total sales for the 48 weeks ended January 1, 2005, totaled $1,711.7 million, a 17.1% increase from the prior year period of $1,462.1 million. Comparable store sales increased 2.0% for the year to date period.

Video game software sales increased 15% during the holiday period, fueled by sales of games such as "Halo 2" from Microsoft, Inc., "Grand Theft Auto: San Andreas" from Take Two Interactive, "Need for Speed: Underground 2" from Electronic Arts, "Metal Gear Solid 3: Snake Eater" from Konami, and "WWE Smackdown vs. Raw" from THQ, Inc.

R. Richard Fontaine, GameStop's Chairman and Chief Executive Officer, commented, "After a very strong November, when GameStop's comparable store sales rose 23% driven by significant demand across all major platforms, we were well positioned for a strong holiday season. Unfortunately, severe hardware shortages of Sony's PlayStation 2, Microsoft's Xbox, and Nintendo's Dual Screen, have taken a toll. Not only did we lose the tie-in software sales that generally accompany hardware gifts, but due to the shortage affecting the total market, we lost the 'downstream' sales that historically have come our way regardless of where hardware is sold. In all of my years in the video game business, I have never seen shortages of this duration or magnitude. There is no question that there was demand for the product, but not hardware product to satisfy demand. As the season progressed, we expected hardware inventories to improve, and, as the season developed very late, we felt that much of the lost holiday sales could be rescued with more hardware in the last weeks of the season, but the shipments did not materialize."

Fontaine continued, "To put into perspective the impact of not being able to secure the hardware we needed, our December month-end inventory was $33 million lower than the previous year even though we had over 300 added stores. It became very clear as the month went on, and hardware shortages continued, that there was a significant effect on store traffic.

"In addition, we believe that the incredible 1.3 million unit sales, in late October and early November, of 'Grand Theft Auto: San Andreas' for PlayStation 2, and 'Halo 2' for Xbox, led the avid gamers (many of whom bought both titles) to be less active in purchasing additional titles during the month of December.

"While we were frustrated by the supply shortfall, we view this as a temporary problem, as we know that our hardware manufacturers will aggressively work to expand the user base that is so obviously ready to purchase the product. Our disappointment at not having the product to sell is, to some degree, tempered by our enthusiasm for the fact that in the fourth and fifth holiday season for Xbox and PlayStation2, demand was phenomenal."

Due to the factors discussed above, December software sales have not met our expectations. As such, we are now forecasting comparable store sales to range from flat to +1.0% for the fourth quarter, with quarterly earnings per diluted share between $0.68 and $0.70 compared to earlier forecasted comparable store sales of between +6.0% and +9.0%, and earnings per diluted share of between $0.81 and $0.84. This brings full year earnings per diluted share guidance to between $1.15 and $1.17, before one-time charges of $0.06 per diluted share.

A conference call with GameStop Corp.'s management will be simulcast on the Web at (http://www.gamestop.com) beginning at 11:00 AM ET on January 7, 2005, and will be accessible at (http://www.gamestop.com/investor-relations), where it will be archived until January 21, 2005.

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.
                           Retail Sales Mix


                                   9 weeks              9 weeks
                                    ended                ended
                               January 1, 2005      January 3, 2004
                             -------------------- --------------------

Video Game Hardware                           18%                  19%
Video Game Software                           64%                  63%
Video Game Accessories                        11%                  12%
PC Software                                    5%                   4%
PC Accessories and Other                       2%                   2%

    CONTACT: GameStop Corp., Grapevine
             Media Contact:
             Director, Public & Investor Relations
             Lori M. Milovich, 817-424-2130
             or
             Investor Contact:
             Executive Vice President & Chief Financial Officer
             David W. Carlson, 817-424-2130

    SOURCE: GameStop Corp.