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GameStop Corp. Reports Record Sales for 2004; Fiscal 2004 Sales Grow 17%; EPS, Before Special Charges, Grows 10.4% In Line with Revised Guidance; Guidance for 2005 Issued

GRAPEVINE, Texas--(BUSINESS WIRE)--March 23, 2005--GameStop Corp. (NYSE:GME)(NYSE:GME.B), the nation's largest video game and entertainment software specialty retailer, today reported record sales and earnings for the fourth quarter and for the full year ended January 29, 2005.

GameStop Corp. sales were $1,842.8 million for fiscal 2004, an increase of 16.7% over fiscal 2003 sales of $1,578.8 million. On a comparable store basis, sales increased 1.7% during fiscal 2004. For the fourth quarter ended January 29, 2005, total sales increased 13.3% to $708.7 million, in comparison to $625.4 million in the prior year quarter. Comparable store sales increased 0.2% during the quarter; with total video game software sales increasing by 14% for the quarter and 22% for the full year.

Before special charges as detailed on Schedule I, fiscal 2004 earnings per diluted share were $1.17, an increase of 10.4%, as compared to $1.06 per diluted share in the prior fiscal year. For the fourth quarter of 2004 earnings per diluted share were $0.70, as compared to $0.67 per diluted share in the fourth quarter of 2003. These earnings were at the high end of our previously revised guidance.

Earnings after special charges were $34.5 million, or $0.64 per diluted share, for the fourth quarter of 2004, and $60.9 million, or $1.05 per diluted share, for the full year.

"2004 was a superb year for GameStop with record sales, not withstanding the severe, and universal, shortage of hardware for all systems throughout the important fourth quarter," said R. Richard Fontaine, Chairman and Chief Executive Officer. "Last year GameStop opened 338 new stores, our most aggressive and successful new store roll-out ever, and this year we plan to continue our rapid growth initiatives by opening between 370 to 400 new stores.

"GameStop's new and used business model continues to be refined and generate a superior return on investment while generating significant cash flows. We finished the year with a strong balance sheet and a $171 million cash balance. Finally, we continue to grow our market share, positioning GameStop to be an even more important retailer in a fast-growing business with a bright future."

Guidance for First Quarter and Full Year 2005

While much of the industry is already looking ahead to major new system launches in late 2005 and early 2006, GameStop believes that the continued demand for the slimmed down PlayStation 2, and the excitement generated by the launch of Sony's first ever multi-function hand-held system, PlayStation Portable (PSP), combined with demand for legacy software titles, will provide the Company with significant product excitement to make 2005 another strong year.

For the first quarter of fiscal 2005, the company expects comparable store sales to range from +5.0% to +7.0%, while diluted earnings per share are expected to range from $0.16 to $0.17. For the fiscal year ending January 28, 2006, sales are expected to grow between 15% and 20%, with comparable store sales ranging from flat to 5%. Diluted earnings per share for the full year are expected to range from $1.30 to $1.40, an increase of 11% to 20%. GameStop notes that the wide range of guidance is due to its inability to control or predict the timing of release of new platforms, as well as the initial allocations.

Fiscal 2005 guidance is before any charges related to expensing the estimated fair value of stock options which should commence in the third quarter of 2005.

Lease Accounting

The Company, similar to many other retailers, has revised its method of accounting for rent expense (and related deferred rent liability) and leasehold improvements funded by landlord incentives for allowances under operating leases (tenant improvement allowances) to conform to generally accepted accounting principles, as recently clarified by the Chief Accountant of the SEC in a February 7, 2005 letter to the American Institute of Certified Public Accountants. A one-time, non-cash, after-tax adjustment of $3.3 million was made in the fourth quarter of fiscal 2004 to correct the calculation of straight-line rent expense. For all stores opened since the beginning of fiscal 2002, the Company has calculated straight-line rent expense using the initial lease term, but was depreciating leasehold improvements over the initial lease term plus the option periods. The Company is correcting its calculation of straight-line rent expense to include the impact of escalating rents for periods in which we are reasonably assured of exercising lease options and to include any "rent holiday" period the lease allows while the store is being constructed. The company is also correcting its calculation of depreciation expense for leasehold improvements for those leases which do not include an option period. The impact of these corrections on fiscal 2002 and 2003 was not material and the adjustments do not affect historical or future cash flows or the timing of payments under related leases.

In addition, the Company is changing its classification of tenant improvement allowances on the balance sheets and statements of cash flows. Like many other retailers, the Company has historically classified tenant improvement allowances as reductions of property and equipment on the Company's balance sheet, as reductions in depreciation and amortization in the Company's statements of operations and as reductions in capital expenditures, an investing activity, on the Company's statements of cash flows. In order to comply with the provisions of FASB Technical Bulletin No. 88-1, "Issues Relating to Accounting for Leases" (FTB 88-1), however, the Company will classify tenant improvement allowances as deferred rent liabilities (in long-term liabilities) on the Company's balance sheet, as a reduction of rent expense (in selling, general and administrative expenses) in the statements of operations and as an operating activity on the statements of cash flows. The effect of this correction increased property and equipment and long-term liabilities on the Company's balance sheets by $4.7 million as of January 29, 2005 and $3.3 million as of January 31, 2004, and increased net cash flows provided by operating activities and increased net cash flows used in investing activities in the Company's statements of cash flows by $2.3 million, $1.5 million and $1.1 million in fiscal 2004, 2003 and 2002, respectively. The effect of this correction on the Company's statements of operations was not material in fiscal 2004, 2003 or 2002.

Conference Call and Webcast Information

A conference call with GameStop Corp.'s management will be simulcast on the Web at (http://www.gamestop.com/investor-relations/) beginning at 11:00 a.m. ET on March 23, 2005, and will be accessible at (http://www.gamestop.com/investor-relations/), where it will be archived until April 6, 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 1,826 retail stores throughout the 50 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 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    13 weeks
                                                  ended       ended
                                               January 29, January 31,
                                                   2005        2004
                                               ----------- -----------

Sales                                            $708,740    $625,381
Cost of sales                                     527,622     461,705
                                               ----------- -----------
   Gross profit                                   181,118     163,676

Selling, general and administrative expenses      114,302      90,041
Depreciation and amortization                      10,836       8,680
                                               ----------- -----------
Operating earnings                                 55,980      64,955

Interest expense (income), net                        489        (156)
                                               ----------- -----------

Earnings before income tax expense                 55,491      65,111
Income tax expense                                 20,974      25,554
                                               ----------- -----------

Net earnings                                      $34,517     $39,557
                                               =========== ===========

Earnings per common share:
     Basic                                          $0.68       $0.71
     Diluted                                        $0.64       $0.67

Weighted average common shares
     outstanding:
     Basic                                         50,702      55,705
     Diluted                                       54,155      59,195


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

Sales                                               100.0%      100.0%
Cost of sales                                        74.4%       73.8%
                                               ----------- -----------

Gross profit                                         25.6%       26.2%

SG&A expenses                                        16.1%       14.4%
Depreciation and amortization                         1.6%        1.4%
                                               ----------- -----------

Operating earnings                                    7.9%       10.4%

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

Earnings before income tax expense                    7.8%       10.4%

Income tax expense                                    2.9%        4.1%
                                               ----------- -----------

Net earnings                                          4.9%        6.3%
                                               =========== ===========


                            GameStop Corp.
                       Statements of Operations
                (in thousands, except per share data)

                                              52 weeks     52 weeks
                                                ended        ended
                                             January 29,  January 31,
                                                 2005         2004
                                            ------------ -------------
Sales                                        $1,842,806    $1,578,838
Cost of sales                                 1,328,611     1,142,264
                                            ------------ -------------

   Gross profit                                 514,195       436,574

Selling, general and administrative
 expenses                                       378,029       302,703
Depreciation and amortization                    37,019        29,487
                                            ------------ -------------

Operating earnings                               99,147       104,384
Interest expense (income), net                      236          (804)
                                            ------------ -------------

Earnings before income tax expense               98,911       105,188
Income tax expense                               37,985        41,721
                                            ------------ -------------

Net earnings                                    $60,926       $63,467
                                            ============ =============

Earnings per common share:
     Basic                                        $1.11         $1.13
     Diluted                                      $1.05         $1.06

Weighted average common shares
     outstanding:
     Basic                                       54,662        56,330
     Diluted                                     57,796        59,764


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

Sales                                             100.0%        100.0%
Cost of sales                                      72.1%         72.4%
                                            ------------ -------------

Gross profit                                       27.9%         27.6%

SG&A expenses                                      20.5%         19.2%
Depreciation and amortization                       2.0%          1.8%
                                            ------------ -------------

Operating earnings                                  5.4%          6.6%

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

Earnings before income tax expense                  5.4%          6.6%

Income tax expense                                  2.1%          2.6%
                                            ------------ -------------

Net earnings                                        3.3%          4.0%
                                            ============ =============


                            GameStop Corp.
                            Balance Sheets
                (in thousands, except per share data)

                                                   January   January
                                                      29,       31,
                                                     2005      2004
                                                   --------- ---------
ASSETS:
Current assets:
  Cash and cash equivalents                        $170,992  $204,905
  Receivables, net                                    9,812     9,545
  Merchandise inventories                           216,296   223,526
  Prepaid expenses and other current assets          18,400    14,340
  Prepaid taxes                                       3,053    12,775
  Deferred taxes                                      5,435     7,661
                                                   --------- ---------
    Total current assets                            423,988   472,752
                                                   --------- ---------

Property and equipment:
  Land                                                2,000        --
  Leasehold improvements                            106,428    64,227
  Fixtures and equipment                            184,536   131,556
                                                   --------- ---------
                                                    292,964   195,783
  Less accumulated depreciation and amortization    124,565    88,487
                                                   --------- ---------
    Net property and equipment                      168,399   107,296
                                                   --------- ---------
Goodwill, net                                       320,888   320,826
Other noncurrent assets                               1,708     1,315
                                                   --------- ---------
    Total other assets                              322,596   322,141
                                                   --------- ---------
    Total assets                                   $914,983  $902,189
                                                   ========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Accounts payable                                 $206,739  $204,011
  Accrued liabilities                                94,983    79,839
  Note payable, current portion                      12,173        --
                                                   --------- ---------
    Total current liabilities                       313,895   283,850
Deferred taxes                                       20,257    17,731
Note payable, long-term portion                      24,347        --
Other long-term liabilities                          13,473     6,575
                                                   --------- ---------
                                                     58,077    24,306
                                                   --------- ---------
    Total liabilities                               371,972   308,156
                                                   --------- ---------

Stockholders' equity:
  Preferred stock -- authorized 5,000 shares; no
   shares issued or outstanding                          --        --
  Class A common stock -- $.001 par value;
   authorized 300,000 shares; 24,189 and 22,993
   shares issued, respectively                           24        23
  Class B common stock -- $.001 par value;
   authorized 100,000 shares; 29,902 and 36,009
   shares issued,  respectively                          30        36
  Additional paid-in-capital                        500,769   510,597
  Accumulated other comprehensive income                567       296
  Retained earnings                                  91,621   118,087
  Treasury stock, at cost, 3,263 and 2,304 shares,
   respectively                                     (50,000)  (35,006)
                                                   --------- ---------
    Total stockholders' equity                      543,011  $594,033
                                                   --------- ---------
    Total liabilities and stockholders' equity     $914,983  $902,189
                                                   ========= =========


                            GameStop Corp.
                           Retail Sales Mix



                                         52 weeks         52 weeks
                                          ended            ended
                                     January 29, 2005 January 31, 2004
                                     ---------------- ----------------

Video Game Hardware                               16%              16%
Video Game Software                               66%              63%
Video Game Accessories                            11%              12%
PC Software                                        5%               6%
PC Accessories and Other                           2%               3%


                                         13 weeks         13 weeks
                                          ended            ended
                                     January 29, 2005 January 31, 2004
                                     ---------------- ----------------

Video Game Hardware                               18%              18%
Video Game Software                               63%              63%
Video Game Accessories                            12%              12%
PC Software                                        5%               5%
PC Accessories and Other                           2%               2%


                              Schedule I
                            GameStop Corp.
                     Schedule of Special Charges
                            (in thousands)

                                        13 weeks         52 weeks
                                         ended             ended
                                    January 29, 2005 January 29, 2005
                                    ---------------- -----------------

California class action settlement
 costs                                          $--            $2,750

Spin-off professional fees                       --             2,800

Cumulative adjustment for change in
 accounting for operating leases              5,373             5,373
                                    ---------------- -----------------

Total special charges                        $5,373           $10,923
                                    ================ =================




California class action settlement
 costs, net of income taxes                     $--            $1,708
Spin-off professional fees, net of
 income taxes                                    --             1,739

Cumulative adjustment for change in
 accounting for operating leases,
 net of income taxes                          3,312             3,312
                                    ---------------- -----------------

Total special charges, net of
 income taxes                                $3,312            $6,759
                                    ================ =================



                             Schedule II
                            GameStop Corp.
                  Reconciliation of Special Charges
                (in thousands, except per share data)

                                        13 weeks        Percentage
                                         ended              Of
                                    January 29, 2005       Sales
                                    ---------------- -----------------

Selling, general and administrative
 expenses                                  $114,302             16.1%
Less: Special charges                        (5,134)            (0.7%)
                                    ---------------- ----------------

Selling, general and administrative
 expenses excluding special charges        $109,168             15.4%
                                    ================ ================

Depreciation and amortization               $10,836              1.6%
Less: Special charges                          (239)              --
                                    ---------------- ----------------

Depreciation and amortization
 excluding special charges                  $10,597              1.6%
                                    ================ ================

Operating earnings                          $55,980              7.9%
Add: Special charges                          5,373              0.7%
                                    ---------------- ----------------

Operating earnings excluding
 special charges                            $61,353              8.6%
                                    ================ ================


Net earnings                                $34,517              4.9%
Add: Special charges, net of income
 taxes                                        3,312              0.4%
                                    ---------------- ----------------

Net earnings excluding special
 charges, net of income taxes               $37,829              5.3%
                                    ================ ================


Net earnings per common share --
 diluted                                      $0.64
Add: Special charges per common
 share -- diluted                             $0.06
                                    ----------------
Net earnings excluding special
 charges per common share --
 diluted                                      $0.70
                                    ================


                             Schedule III
                            GameStop Corp.
                  Reconciliation of Special Charges
                (in thousands, except per share data)

                                                  52 weeks
                                                    ended   Percentage
                                                   January       Of
                                                   29, 2005     Sales
                                                  --------- ----------

Selling, general and administrative expenses      $378,029      20.5%
Less: Special charges                              (10,684)     (0.6%)
                                                  --------- ---------

Selling, general and administrative expenses
 excluding special charges                        $367,345      19.9%
                                                  ========= =========

Depreciation and amortization                      $37,019       2.0%
Less: Special charges                                 (239)       --
                                                  --------- ---------

Depreciation and amortization excluding special
 charges                                           $36,780       2.0%
                                                  ========= =========

Operating earnings                                 $99,147       5.4%
Add: Special charges                                10,923       0.6%
                                                  --------- ---------

Operating earnings excluding special charges      $110,070       6.0%
                                                  ========= =========


Net earnings                                       $60,926       3.3%
Add: Special charges, net of income taxes            6,759       0.4%
                                                  --------- ---------

Net earnings excluding special charges, net of
 income taxes                                      $67,685       3.7%
                                                  ========= =========


Net earnings per common share -- diluted             $1.05
Add: Special charges per common share -- diluted     $0.12
                                                  ---------
Net earnings excluding special charges per common
 share -- diluted                                    $1.17
                                                  =========

    CONTACT: GameStop Corp., Grapevine
             Media Contact:
             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.