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GameStop Corp. Reports Record Earnings for 2003; Fourth Quarter EPS Grows 29%; 300 - 330 New Stores Projected for 2004

GRAPEVINE, Texas--(BUSINESS WIRE)--March 17, 2004--GameStop Corp. (NYSE:GME), the nation's largest video game and entertainment software specialty retailer, today reported record earnings for the fourth quarter and for the full year ended January 31, 2004.

GameStop reported record earnings of $63.5 million during the fiscal year ended January 31, 2004, or $1.06 per diluted share, an increase of 21.8%, as compared to $52.4 million, or $0.87 per diluted share, in the prior fiscal year. For the fourth quarter of fiscal 2003, earnings were $39.6 million, or $0.67 per diluted share, an increase of 28.8%, as compared to $31.6 million, or $0.52 per diluted share, in the prior year quarter.

Operating margins on a pro-forma basis, after considering the effects of implementing EITF 02-16 (see Schedules I and II), rose 40 basis points in the fourth quarter, to 10.5%, and full-year operating margins improved 50 basis points to 6.9%. Operating margin improvements were primarily achieved through gross margin expansion, as GameStop continued to refine its promotional marketing, and improve in-store merchandising to generate a more favorable merchandise mix. In addition, fourth quarter productivity of new stores exceeded the company's expectations.

GameStop finished fiscal 2003 with a strong balance sheet, including a cash balance of $205 million, and no debt outstanding. GameStop's business model has proven to generate a superior return on investment with significant free-cash flow and nominal per-store cash requirements.

"We set very aggressive growth and productivity goals for GameStop in 2003," said R. Richard Fontaine, Chairman and CEO. "I am pleased that virtually all areas of our business were improved throughout the year. We started the year with a goal of making the GameStop model more productive, and we have successfully done so. Our in-store merchandising presentation was more effective, our distribution became more efficient, and our store systems became more responsive to the changing needs of the business. In addition, our new and used business combination was further refined during the year, our stores are almost entirely rebranded, and our market-by-market real estate assessments were more thorough and successful than ever. As such, we are very confident in the outlook for 2004, and plan to add another 300 to 330 new stores throughout the United States and Europe."

Guidance for the first quarter and full year 2004 remain unchanged. For the first quarter of fiscal 2004, the company continues to expect comparable store sales to range from flat to +2%, while diluted earnings per share are expected to range from $0.13 to $0.14. For the fiscal year ending January 29, 2005, diluted earnings per share are expected to range from $1.20 to $1.24.

During the first quarter of fiscal 2003, GameStop implemented FASB Emerging Issues Task Force Issue 02-16 (EITF 02-16), which deals with the accounting for vendor rebates, advertising allowances, and other cash consideration received from vendors. The implementation of EITF 02-16 reduced fiscal 2003 net earnings by $0.05 per diluted share due to the deferral of vendor allowances reported as a reduction in merchandise inventories. In Schedules I and II, we have presented both this year's and last year's fourth quarter and year to date results on a pro forma basis as if EITF 02-16 had been implemented prior to the beginning of fiscal 2002.

About GameStop Corp.

Headquartered in Grapevine, TX, GameStop Corp. (NYSE:GME) 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 1,514 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.

Barnes and Noble, Inc. (NYSE:BKS), the world's largest bookseller, has approximately a 65 percent interest in GameStop. 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, 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           13 weeks
                                       ended              ended
                                 January 31, 2004   February 1, 2003
                                ------------------  ----------------

Sales                          $          625,381  $        520,396
Cost of sales                             461,705           393,477
                                ------------------  ----------------
   Gross profit                           163,676           126,919

Selling, general and
 administrative expenses                   90,581            68,459
Depreciation and amortization               8,140             5,948
                                ------------------  ----------------
Operating earnings                         64,955            52,512
Interest expense (income), net               (156)             (375)
                                ------------------  ----------------

Earnings before income tax expense         65,111            52,887
Income tax expense                         25,554            21,300
                                ------------------  ----------------

Net earnings                   $           39,557  $         31,587
                                ==================  ================

Earnings per common share:
     Basic                     $             0.71  $           0.55
     Diluted                   $             0.67  $           0.52

Weighted average common shares
     outstanding:
     Basic                                 55,705            57,040
     Diluted                               59,195            60,561

Percentage of sales:
--------------------------------

Sales                                      100.0%             100.0%
Cost of sales                               73.8%              75.6%
                                  ---------------   ----------------

Gross profit                                26.2%              24.4%

SG&A expenses                               14.5%              13.2%
Depreciation and amortization                1.3%               1.1%
                                  ---------------   ----------------

Operating earnings                          10.4%              10.1%

Interest expense (income), net                 -              (0.1)%
                                  ---------------   ----------------

Earnings before income tax expense          10.4%              10.2%

Income tax expense                           4.1%               4.1%
                                  ---------------   ----------------

Net earnings                                 6.3%               6.1%
                                  ===============   ================
                                    GameStop Corp.
                               Statements of Operations
                         (in thousands, except per share data)

                                    52 weeks            52 weeks
                                      ended               ended
                                January 31, 2004    February 1, 2003
                               -----------------  ------------------
Sales                         $       1,578,838  $        1,352,791
Cost of sales                         1,142,264           1,009,491
                               -----------------  ------------------

   Gross profit                         436,574             343,300

Selling, general and
 administrative expenses                303,243             233,676
Depreciation and amortization            28,947              22,553
                               -----------------  ------------------
Operating earnings                      104,384              87,071
Interest expense (income), net             (804)               (630)
                               -----------------  ------------------

Earnings before income tax
 expense                                105,188              87,701
Income tax expense                       41,721              35,297
                               -----------------  ------------------

Net earnings                  $          63,467  $           52,404
                               =================  ==================

Earnings per common share:
     Basic                    $            1.13  $             0.93
     Diluted                  $            1.06  $             0.87

Weighted average common
 shares outstanding:
     Basic                               56,330              56,289
     Diluted                             59,764              60,419

Percentage of sales:
--------------------------------

Sales                                    100.0%            100.0%
Cost of sales                             72.4%             74.6%
                                  -------------  ----------------

Gross profit                              27.6%             25.4%

SG&A expenses                             19.2%             17.3%
Depreciation and amortization              1.8%              1.7%
                                  -------------  ----------------

Operating earnings                         6.6%              6.4%

Interest expense (income), net               -             (0.1)%
                                  -------------  ----------------

Earnings before income tax expense         6.6%              6.5%

Income tax expense                         2.6%              2.6%
                                  -------------  ----------------

Net earnings                               4.0%              3.9%
                                  =============  ================
                            GameStop Corp.
                            Balance Sheets
                (in thousands, except per share data)

                                      January 31,        February 1,
                                         2004               2003
                                   -----------------   ---------------
ASSETS:
Current assets:
   Cash and cash equivalents     $        204,905   $       232,030
   Receivables, net                         9,545             6,893
   Merchandise inventories                223,526           161,369
   Prepaid expenses and other
    current assets                         14,340            10,127
   Prepaid taxes                           12,775                 -
   Deferred taxes                           7,661             6,034
                                  ----------------   ---------------
   Total current assets                   472,752           416,453
                                  ----------------   ---------------

Property and equipment:
   Leasehold improvements                  57,259            39,927
   Fixtures and equipment                 131,556            84,726
                                  ----------------   ---------------
                                          188,815           124,653
   Less accumulated depreciation
    and amortization                       84,784            56,259
                                  ----------------   ---------------
   Net property and equipment             104,031            68,394
                                  ----------------   ---------------

Goodwill, net                             320,826           317,957
Other noncurrent assets                     1,315             1,105
                                  ----------------   ---------------
   Total assets                  $        898,924   $       803,909
                                  ================   ===============


LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Accounts payable              $        204,011   $       160,378
   Accrued liabilities                     79,839            65,779
   Accrued income taxes payable                 -            15,814
                                  ----------------   ---------------
   Total current liabilities              283,850           241,971

Deferred taxes                             17,731            10,391
Other long-term liabilities                 3,310             2,872
                                  ----------------   ---------------
   Total liabilities                      304,891           255,234
                                  ----------------   ---------------

Stockholders' equity:
   Preferred stock - authorized
    5,000 shares; no shares
    issued or outstanding                       -                 -
   Class A common stock - $.001
    par value; authorized
    300,000 shares; 22,993 and
    21,050 shares issued and
    outstanding, respectively                  23                21
   Class B common stock - $.001
    par value; authorized
    100,000 shares; 36,009 shares
    issued and outstanding                     36                36
   Additional paid-in-capital             510,597           493,998
   Accumulated other
    comprehensive income                      296                 -
   Retained earnings                      118,087            54,620
   Treasury stock, at cost, 2,304
    and 0 shares, respectively            (35,006)                -
                                  ----------------   ---------------
   Total stockholders' equity             594,033   $       548,675
                                  ----------------   ---------------
   Total liabilities and
    stockholders' equity         $        898,924   $       803,909
                                  ================   ===============
                              Schedule I
                            GameStop Corp.
                   Pro-Forma Statement of Operations
                 (in thousands, except per share data)

                                     13 weeks           13 weeks
                                       ended              ended
                                 January 31, 2004   February 1, 2003
                               -----------------   ------------------

Sales                         $         625,381   $          520,396
Cost of sales (1)                       460,738              387,191
                               -----------------   ------------------

   Gross profit                         164,643              133,205

Selling, general and
 administrative expenses (1)             90,582               74,821
Depreciation and amortization             8,140                5,948
                               -----------------   ------------------

Operating earnings                       65,921               52,436

Interest expense (income), net             (156)                (375)
                               -----------------   ------------------

Earnings before income tax
 expense                                 66,077               52,811

Income tax expense                       25,910               21,269
                               -----------------   ------------------

Net earnings                  $          40,167   $           31,542
                               =================   ==================

Net earnings per common share:
     Basic                    $            0.72   $             0.55
     Diluted                  $            0.68   $             0.52

Weighted average common shares
 outstanding:
     Basic                               55,705               57,040
     Diluted                             59,195               60,561


Percentage of sales:
----------------------------

Sales                                     100.0%               100.0%
Cost of sales                              73.7%                74.4%
                               -----------------   ------------------

Gross profit                               26.3%                25.6%

SG&A expenses                              14.5%                14.4%
Depreciation and amortization               1.3%                 1.1%
                               -----------------   ------------------

Operating earnings                         10.5%                10.1%

Interest expense (income), net                 -                (0.1)%
                               -----------------   ------------------

Earnings before income tax
 expense                                   10.5%                10.2%

Income tax expense                          4.1%                 4.1%
                               -----------------   ------------------

Net earnings                                6.4%                 6.1%
                               =================   ==================

    Footnote to Schedule I:

(1) If GameStop had implemented EITF 02-16 prior to the beginning of
    fiscal 2002, vendor allowances in excess of reimbursement for
    specific, incremental, identifiable costs would have equated to
    $6,362 for the 13 weeks ended February 1, 2003. GameStop would
    have recognized vendor allowances as a reduction in cost of sales
    aggregating $967 during the 13 weeks ended January 31, 2004.
    GameStop would have deferred vendor allowances aggregating $76 as
    a reduction in merchandise inventories during the 13 weeks ended
    February 1, 2003.
                              Schedule II
                            GameStop Corp.
                   Pro-Forma Statement of Operations
                 (in thousands, except per share data)

                                      52 weeks            52 weeks
                                        ended              ended
                                  January 31, 2004    February 1, 2003
                                --------------------  ----------------

Sales                          $          1,578,838  $      1,352,791
Cost of sales (1)                         1,138,596           984,530
                                --------------------  ----------------

   Gross profit                             440,242           368,261

Selling, general and
 administrative  expenses (1)               303,243           258,972
Depreciation and amortization                28,947            22,553
                                --------------------  ----------------

Operating earnings                          108,052            86,736

Interest expense (income), net                 (804)             (630)
                                --------------------  ----------------

Earnings before income tax expense          108,856            87,366

Income tax expense                           43,108            35,160
                                --------------------  ----------------

Net earnings                   $             65,748  $         52,206
                                ====================  ================

Net earnings per common share:
     Basic                     $               1.17  $           0.93
     Diluted                   $               1.10  $           0.86

Weighted average common shares
     outstanding:
     Basic                                   56,330            56,289
     Diluted                                 59,764            60,419

Percentage of sales:
-------------------------------

Sales                                         100.0%            100.0%
Cost of sales                                  72.1%             72.8%
                                --------------------  ----------------

Gross profit                                   27.9%             27.2%

SG&A expenses                                  19.2%             19.1%
Depreciation and amortization                   1.8%              1.7%
                                --------------------  ----------------

Operating earnings                              6.9%              6.4%

Interest expense (income), net                    -             (0.1%)
                                --------------------  ----------------

Earnings before income tax expense              6.9%              6.5%

Income tax expense                              2.7%              2.6%
                                --------------------  ----------------

Net earnings                                    4.2%              3.9%
                                ====================  ================

    Footnote to Schedule II:

(1) If GameStop had implemented EITF 02-16 prior to the beginning of
    fiscal 2002, vendor allowances in excess of reimbursement for
    specific, incremental, identifiable costs would have equated to
    $25,296 for the 52 weeks ended February 1, 2003. GameStop would
    have recognized vendor allowances as a reduction in cost of sales
    aggregating $3,668 during the 52 weeks ended January 31, 2004.
    GameStop would have deferred vendor allowances aggregating $335 as
    a reduction in merchandise inventories during the 52 weeks ended
    February 1, 2003.

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

    SOURCE: GameStop Corp.