Preliminary Unaudited First Quarter Fiscal 2020 Results:
As a result of the spread of COVID-19 around the world, the Company’s various operations across 14 countries were negatively impacted during the quarter. Approximately 76% of the Company’s 1,802 international stores temporarily closed for business beginning in March. As previously announced, on
On a preliminary basis for the 13-weeks ended
- Total global sales are expected to decrease in the range of 33% to 35% from
$1.5 billionin the prior year fiscal quarter.
- Comparable store sales are expected to decrease in the range of approximately 30% to 31%. Excluding stores that were closed during the first quarter as a result of the COVID-19 pandemic, comparable store sales are expected to decline in the range of approximately 16% to 17%.
- The Company expects hardware sales to be a larger percentage, and software sales to be a smaller percentage, of total sales in the first quarter of fiscal 2020 compared to the prior year fiscal quarter.
- Cash flow from operations is expected to be approximately
($49) millioncompared to ($665) millionin the prior year fiscal quarter. The decrease in cash used in operations is primarily attributable to the Company’s focus on optimizing the cash conversion cycle and carrying more efficient levels of inventory, which resulted in accounts payable at the beginning of the first quarter of fiscal 2020 being approximately $671.1 millionlower than at the beginning of the prior year fiscal quarter.
- Inventory at quarter end is expected to decline by approximately 43%, or
$500 million, to approximately $650 millioncompared to $1.1 billionin the first quarter of fiscal 2019. The Company expects to record $13.5 millionrelated to inventory reserves and obsolescence in the first quarter of fiscal 2020 compared to $9.6 millionin the first quarter of fiscal 2019.
- Accounts payable for the quarter is expected to decrease approximately 54%, or
$245 million, to approximately $212 millioncompared to $458 millionin the first quarter of fiscal 2019.
- Net (loss) income is expected to be in the range of
($172) millionto ($162) millioncompared to approximately $6.8 millionin the prior year fiscal quarter, and includes approximately $53 millionin non-cash tax charge associated with the valuation allowance against the Company’s deferred tax assets.
- Adjusted EBITDA is expected to be in the range of
($79) millionto ($74) millioncompared to $43 millionin the prior year fiscal quarter (See Reconciliation Schedule I.)
The Company’s expected total sales, comparable store sales, adjusted EBITDA and cash flows from operations for the quarter ended
Store Operations Update
The Company continues to phase the reopening of its stores across all operating countries where restrictions related to the global pandemic have been lifted, and according to the mandates provided by country, state and local officials, including the implementation of strict sanitary processes and social distancing measures. As a result, at the end of
Subsequently, given the recent social unrest experienced in various cities across
First Quarter Fiscal 2020 Earnings Call Details:
The Company anticipates announcing first quarter fiscal 2020 earnings results after the market closes on
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Cautionary Statement Regarding Forward-Looking Statements - Safe Harbor
Expectations about quarterly results are based on preliminary unaudited information about the first fiscal quarter of 2020 and are subject to revision. Although the quarter is now completed, the Company is still in the early stages of standard financial reporting closing procedures. Accordingly, as normal quarter-end closing and review processes conclude, actual results could differ materially from these preliminary results. Factors that could cause actual results for the quarter to differ materially from those contemplated by these forward-looking statements include, but are not limited to, inaccurate assumptions; unrecorded expenses; changes in estimates or judgments; and facts or circumstances affecting the application of the Company’s critical accounting policies.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management’s current beliefs, views, estimates and expectations, including as to the Company’s industry, business strategy, goals and expectations concerning its market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information, including expectations as to future operating profit improvement. Such statements include without limitation those about the Company’s preliminary estimated financial results, expectations and other statements that are not historical facts. Forward-looking statements are subject to significant risks and uncertainties and actual developments, business decisions and results may differ materially from those reflected or described in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those reflected or described in the forward-looking statements: macroeconomic pressures, including the effects of COVID-19 on consumer spending; the impact of the COVID-19 pandemic on the Company’s business and financial results; the economic, social and political conditions or civil unrest in the
The following table reconciles Adjusted EBITDA to net (loss) income for the periods specified below. We have provided a low and high range for the 13 weeks ended
|13 Weeks Ended
||13 Weeks Ended
|Reconciliation of Adjusted EBITDA to Net (Loss) Income|
|Net (loss) income||$||(171.8||)||$||(161.9||)||$||6.8|
|Loss from discontinued operations, net of tax||0.6||0.6||0.7|
|(Loss) income from continuing operations||$||(171.2||)||$||(161.3||)||$||7.5|
|Interest expense, net||6.7||6.7||7.7|
|Depreciation and amortization||21.5||21.5||23.3|
|Income tax expense||52.9||47.9||2.3|
|Property, equipment & other asset impairments||3.9||3.9||—|
|Severance and other||2.4||2.4||—|
Non-GAAP Measures and Other Metrics
Adjusted EBITDA is a supplemental financial measure of the Company’s performance that is not required by, or presented in accordance with, GAAP. We believe that the presentation of this non-GAAP financial measure provides useful information to investors in assessing our financial condition and results of operations. We define Adjusted EBITDA as net income (loss) before income taxes, plus interest expense, net and depreciation and amortization, excluding stock-based compensation, transformation costs, business divestitures, asset impairments, severance and other non-cash charges. Net income (loss) is the GAAP financial measure most directly comparable to Adjusted EBITDA. Our non-GAAP financial measures should not be considered as an alternative to the most directly comparable GAAP financial measure. Furthermore, non-GAAP financial measures have limitations as an analytical tool because they exclude some but not all items that affect the most directly comparable GAAP financial measures. Some of these limitations include:
• certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure;
• Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
• our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
We compensate for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP financial measure, understanding the differences between the GAAP and non-GAAP financial measures and incorporating these data points into our decision-making process. Adjusted EBITDA is provided in addition to, and not as an alternative to, the Company’s financial results prepared in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined and determined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Source: GameStop Corporation