GameStop Reports Sales and Earnings for Fourth Quarter and Fiscal Year 2017 and Provides 2018 Outlook
Global Same Store Sales Increase 12.2% for the Quarter and 5.8% for the Year
Hardware Sales Increase 44.8% for the Quarter and 28.3% for the Year
Collectibles Sales Increase 22.8% for the Quarter and 28.8% for the Year
Mike Mauler, chief executive officer, stated, “Our fourth quarter performance continued to demonstrate that
Mr. Mauler continued, “While we had a solid performance in 2017, there are still many areas to improve that will drive future profitability. We have three core profitable businesses; Video Games, Collectibles, and Technology Brands. Moving forward over the next year, we plan to pause on investing in additional new businesses or acquisitions and focus on the fundamentals of improving the businesses that we already have. I believe focusing on the basics of retail operational excellence across the organization will maximize our free cash flow, improve our performance and, ultimately, deliver returns for our shareholders.”
Fourth Quarter Results
Total global sales increased 15.0% to
Digital sales and non-GAAP digital receipts increased 41.0% and 16.1%, respectively, excluding the fourth quarter 2016 revenues from Kongregate which was sold in
Collectibles sales increased 22.8% to
Technology Brands sales decreased 14.2% to
GameStop’s fourth quarter GAAP net income (loss) was
Excluding asset impairment and other charges and related tax adjustments,
A reconciliation of non-GAAP results, including adjusted net income, operating earnings, Technology Brands operating earnings and free cash flow, to its closest GAAP measure is included with this release (Schedule III and IV).
Fiscal 2017 Results
Total global sales increased 7.2% to
Key takeaways for fiscal 2017 include:
- New hardware sales increased 28.3%, led by demand for Nintendo Switch.
- Collectibles sales increased 28.8% to
$636.2 million on strength in unique and exclusive product offerings. - Digital sales and non-GAAP digital receipts increased 13.8% and 7.1%, respectively, excluding 2016 revenues from Kongregate which was sold in
July 2017 . Reported digital sales increased 4.5% to$189.2 million , while non-GAAP digital receipts increased 5.2% to$1.2 billion . - New software sales increased 3.6%.
- Pre-owned sales declined 4.6%, consistent with the company’s expectations at the beginning of the year.
- Generated free cash flow of
$324.7 million .
Excluding asset impairment and other charges and tax related adjustments,
A reconciliation of non-GAAP results, including adjusted net income, operating earnings, Technology Brands operating earnings and free cash flow, to its closest GAAP measure is included with this release (Schedule III and IV).
Capital Allocation Update
On
2018 Guidance
Total Sales | -2.0% to -6.0% |
Comparable Store Sales (excludes Tech Brands stores) | Flat to -5% |
Income Tax Rate | 26.0% to 27.0% |
Adjusted (Non-GAAP) Earnings Per Share (diluted) | $3.00 to $3.35* |
Capital Expenditures | $110.0 million to $120.0 million |
Earnings per share guidance is calculated based on weighted average shares outstanding of 101.5 million.
*A reconciliation of non-GAAP forward-looking projections to GAAP financial measures is not available as the nature or amount of potential adjustments, which may be significant, cannot be determined at this time.
Conference Call Information
A conference call with GameStop Corp.’s management is scheduled for
About GameStop
General information about
Non-GAAP Measures
As a supplement to our financial results presented in accordance with U.S. generally accepted accounting principles (GAAP),
Safe Harbor
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. Such statements include without limitation those about the Company’s outlook for fiscal 2018, future financial and operating results, projections, expectations and other statements that are not historical facts. Forward-looking statements are subject to significant risks and uncertainties and actual 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 from those reflected or described in the forward-looking statements: our inability to obtain sufficient quantities of product to meet consumer demand; the timing of release and consumer demand for new and pre-owned products; our ability to continue to expand, and successfully open and operate new stores for our collectibles and technology brands businesses; risks associated with achievement of anticipated financial and operating results from acquisitions; our ability to sustain and grow our console digital video game sales; the impact of goodwill and intangible asset impairments; cost reduction initiatives, including store closing costs; risks related to changes in, and our continued retention of, executive officers and other key personnel; changes in consumer preferences and economic conditions; increased operating costs, including wages; cyber security events and related costs; risks associated with international operations; changes to our wireless industry partnerships and operations; increased competition and changing technology in the video game industry; changes in domestic or foreign laws and regulations that reduce consumer demand for, or increase prices of, our products or otherwise adversely affect our business; our effective tax rate and the factors affecting our effective tax rate, including changes in international, federal or state tax, trade and other laws and regulations; the costs and outcomes of legal proceedings and tax audits. Additional factors that could cause our results to differ materially from those reflected or described in the forward-looking statements can be found in
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
14 Weeks Ended February 3, 2018 |
13 Weeks Ended January 28, 2017 |
|||||||
Net sales | $ | 3,502.5 | $ | 3,045.4 | ||||
Cost of sales | 2,478.0 | 2,037.5 | ||||||
Gross profit | 1,024.5 | 1,007.9 | ||||||
Selling, general and administrative expenses | 692.0 | 646.3 | ||||||
Depreciation and amortization | 38.4 | 41.2 | ||||||
Goodwill impairments | 32.8 | — | ||||||
Asset impairments | 358.0 | 33.8 | ||||||
Operating (loss) earnings | (96.7 | ) | 286.6 | |||||
Interest expense, net | 13.1 | 13.8 | ||||||
(Loss) earnings before income tax expense | (109.8 | ) | 272.8 | |||||
Income tax (benefit) expense | (3.9 | ) | 64.1 | |||||
Net (loss) income | $ | (105.9 | ) | $ | 208.7 | |||
Net (loss) income per common share: | ||||||||
Basic | $ | (1.04 | ) | $ | 2.04 | |||
Diluted | $ | (1.04 | ) | $ | 2.04 | |||
Dividends per common share | $ | 0.38 | $ | 0.37 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 101.5 | 102.1 | ||||||
Diluted | 101.6 | 102.5 | ||||||
Percentage of Net Sales: | ||||||||
Net sales | 100.0 | % | 100.0 | % | ||||
Cost of sales | 70.7 | % | 66.9 | % | ||||
Gross profit | 29.3 | % | 33.1 | % | ||||
Selling, general and administrative expenses | 19.8 | % | 21.2 | % | ||||
Depreciation and amortization | 1.1 | % | 1.4 | % | ||||
Goodwill impairments | 0.9 | % | — | % | ||||
Asset impairments | 10.3 | % | 1.1 | % | ||||
Operating (loss) earnings | (2.8 | )% | 9.4 | % | ||||
Interest expense, net | 0.3 | % | 0.4 | % | ||||
(Loss) earnings before income tax expense | (3.1 | )% | 9.0 | % | ||||
Income tax (benefit) expense | (0.1 | )% | 2.1 | % | ||||
Net (loss) income | (3.0 | )% | 6.9 | % | ||||
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
53 weeks ended February 3, 2018 |
52 weeks ended January 28, 2017 |
|||||||
Net sales | $ | 9,224.6 | $ | 8,607.9 | ||||
Cost of sales | 6,184.5 | 5,598.6 | ||||||
Gross profit | 3,040.1 | 3,009.3 | ||||||
Selling, general and administrative expenses | 2,363.0 | 2,252.6 | ||||||
Depreciation and amortization | 150.7 | 165.2 | ||||||
Goodwill impairments | 32.8 | — | ||||||
Asset impairments | 358.0 | 33.8 | ||||||
Operating earnings | 135.6 | 557.7 | ||||||
Interest expense, net | 55.3 | 53.0 | ||||||
Earnings before income tax expense | 80.3 | 504.7 | ||||||
Income tax expense | 45.6 | 151.5 | ||||||
Net income | $ | 34.7 | $ | 353.2 | ||||
Net income per common share: | ||||||||
Basic | $ | 0.34 | $ | 3.42 | ||||
Diluted | $ | 0.34 | $ | 3.40 | ||||
Dividends per common share | $ | 1.52 | $ | 1.48 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 101.4 | 103.4 | ||||||
Diluted | 101.5 | 103.8 | ||||||
Percentage of Net Sales: | ||||||||
Net sales | 100.0 | % | 100.0 | % | ||||
Cost of sales | 67.0 | % | 65.0 | % | ||||
Gross profit | 33.0 | % | 35.0 | % | ||||
Selling, general and administrative expenses | 25.6 | % | 26.2 | % | ||||
Depreciation and amortization | 1.6 | % | 1.9 | % | ||||
Goodwill impairments | 0.4 | % | — | % | ||||
Asset impairments | 3.9 | % | 0.4 | % | ||||
Operating earnings | 1.5 | % | 6.5 | % | ||||
Interest expense, net | 0.6 | % | 0.6 | % | ||||
Earnings before income tax expense | 0.9 | % | 5.9 | % | ||||
Income tax expense | 0.5 | % | 1.8 | % | ||||
Net income | 0.4 | % | 4.1 | % | ||||
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
February 3, 2018 |
January 28, 2017 |
|||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 864.4 | $ | 669.4 | ||||
Receivables, net | 182.7 | 220.9 | ||||||
Merchandise inventories, net | 1,366.7 | 1,121.5 | ||||||
Prepaid expenses and other current assets | 124.9 | 128.9 | ||||||
Total current assets | 2,538.7 | 2,140.7 | ||||||
Property and equipment: | ||||||||
Land | 19.9 | 18.6 | ||||||
Buildings and leasehold improvements | 769.8 | 724.5 | ||||||
Fixtures and equipment | 973.5 | 931.4 | ||||||
Total property and equipment | 1,763.2 | 1,674.5 | ||||||
Less accumulated depreciation | 1,330.0 | 1,203.5 | ||||||
Net property and equipment | 433.2 | 471.0 | ||||||
Goodwill | 1,667.3 | 1,725.2 | ||||||
Other noncurrent assets | 402.4 | 639.0 | ||||||
Total assets | $ | 5,041.6 | $ | 4,975.9 | ||||
Current liabilities: | ||||||||
Accounts payable | $ | 902.0 | $ | 616.6 | ||||
Accrued liabilities | 976.1 | 1,090.9 | ||||||
Income taxes payable | 37.5 | 54.0 | ||||||
Total current liabilities | 1,915.6 | 1,761.5 | ||||||
Other long-term liabilities | 93.6 | 145.3 | ||||||
Long-term debt, net | 817.9 | 815.0 | ||||||
Total liabilities | 2,827.1 | 2,721.8 | ||||||
Stockholders’ equity | 2,214.5 | 2,254.1 | ||||||
Total liabilities and stockholders’ equity | $ | 5,041.6 | $ | 4,975.9 | ||||
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
53 weeks ended February 3, 2018 |
52 weeks ended January 28, 2017 |
|||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 34.7 | $ | 353.2 | ||||
Adjustments to reconcile net income to net cash flows provided by operating activities: | ||||||||
Depreciation and amortization (including amounts in cost of sales) | 151.9 | 166.7 | ||||||
Goodwill and asset impairments | 395.1 | 33.8 | ||||||
Stock-based compensation expense | 25.6 | 17.8 | ||||||
Deferred income taxes | (107.9 | ) | (37.2 | ) | ||||
Excess tax benefits related to stock-based awards | — | 0.8 | ||||||
Loss on disposal of property and equipment | 8.5 | 10.4 | ||||||
Gain on divestiture | (6.4 | ) | — | |||||
Other | 24.9 | 15.5 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables, net | 35.7 | (43.9 | ) | |||||
Merchandise inventories | (256.3 | ) | 14.7 | |||||
Prepaid expenses and other current assets | (1.2 | ) | (11.4 | ) | ||||
Prepaid income taxes and income taxes payable | (24.7 | ) | (49.1 | ) | ||||
Accounts payable and accrued liabilities | 169.8 | 64.1 | ||||||
Changes in other long-term liabilities | (14.8 | ) | 1.7 | |||||
Net cash flows provided by operating activities | 434.9 | 537.1 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (113.4 | ) | (142.7 | ) | ||||
Acquisitions, net of cash acquired of $0.0 and $0.1, respectively | (8.5 | ) | (441.2 | ) | ||||
Proceeds from divestiture | 55.0 | — | ||||||
Other | 3.2 | 5.9 | ||||||
Net cash flows used in investing activities | (63.7 | ) | (578.0 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of acquisition-related debt | (21.8 | ) | (0.4 | ) | ||||
Repurchase of common shares | (22.0 | ) | (63.1 | ) | ||||
Dividends paid | (155.2 | ) | (155.5 | ) | ||||
Proceeds from senior notes | — | 475.0 | ||||||
Borrowings from the revolver | 373.0 | 545.0 | ||||||
Repayments of revolver borrowings | (373.0 | ) | (545.0 | ) | ||||
Payments of financing costs | — | (8.1 | ) | |||||
Issuance of common stock, net of share repurchases for withholding taxes | (3.5 | ) | (8.4 | ) | ||||
Excess tax benefits related to stock-based awards | — | (0.8 | ) | |||||
Net cash flows (used in) provided by financing activities | (202.5 | ) | 238.7 | |||||
Exchange rate effect on cash and cash equivalents | 26.3 | 21.2 | ||||||
Increase in cash and cash equivalents | 195.0 | 219.0 | ||||||
Cash and cash equivalents at beginning of period | 669.4 | 450.4 | ||||||
Cash and cash equivalents at end of period | $ | 864.4 | $ | 669.4 | ||||
Schedule I
Sales Mix
(unaudited)
14 Weeks Ended February 3, 2018 |
13 Weeks Ended January 28, 2017 |
|||||||||||||
Net Sales (in millions): | Net Sales |
Percent of Total |
Net Sales |
Percent of Total |
||||||||||
New video game hardware | $ | 844.0 | 24.1 | % | $ | 583.0 | 19.1 | % | ||||||
New video game software | 1,042.3 | 29.8 | % | 927.4 | 30.5 | % | ||||||||
Pre-owned and value video game products | 663.1 | 18.9 | % | 680.6 | 22.3 | % | ||||||||
Video game accessories | 327.7 | 9.4 | % | 238.5 | 7.8 | % | ||||||||
Digital | 61.4 | 1.8 | % | 57.2 | 1.9 | % | ||||||||
Technology Brands | 219.7 | 6.3 | % | 256.0 | 8.4 | % | ||||||||
Collectibles | 260.8 | 7.4 | % | 212.4 | 7.0 | % | ||||||||
Other | 83.5 | 2.3 | % | 90.3 | 3.0 | % | ||||||||
Total | $ | 3,502.5 | 100.0 | % | $ | 3,045.4 | 100.0 | % | ||||||
53 Weeks Ended February 3, 2018 |
52 Weeks Ended January 28, 2017 |
|||||||||||||
Net Sales (in millions): | Net Sales |
Percent of Total |
Net Sales |
Percent of Total |
||||||||||
New video game hardware | $ | 1,791.8 | 19.4 | % | $ | 1,396.7 | 16.2 | % | ||||||
New video game software | 2,582.0 | 28.0 | % | 2,493.4 | 29.0 | % | ||||||||
Pre-owned and value video game products | 2,149.6 | 23.3 | % | 2,254.1 | 26.2 | % | ||||||||
Video game accessories | 784.3 | 8.5 | % | 676.7 | 7.9 | % | ||||||||
Digital | 189.2 | 2.1 | % | 181.0 | 2.1 | % | ||||||||
Technology Brands | 803.6 | 8.7 | % | 814.0 | 9.5 | % | ||||||||
Collectibles | 636.2 | 6.9 | % | 494.1 | 5.7 | % | ||||||||
Other | 287.9 | 3.1 | % | 297.9 | 3.4 | % | ||||||||
Total | $ | 9,224.6 | 100.0 | % | $ | 8,607.9 | 100.0 | % | ||||||
Schedule II
Gross Profit Mix
(unaudited)
14 Weeks Ended February 3, 2018 |
13 Weeks Ended January 28, 2017 |
|||||||||||||
Gross Profit (in millions): | Gross Profit |
Gross Profit Percent |
Gross Profit |
Gross Profit Percent |
||||||||||
New video game hardware | $ | 61.5 | 7.3 | % | $ | 58.6 | 10.1 | % | ||||||
New video game software | 238.9 | 22.9 | % | 224.4 | 24.2 | % | ||||||||
Pre-owned and value video game products | 298.1 | 45.0 | % | 318.9 | 46.9 | % | ||||||||
Video game accessories | 102.9 | 31.4 | % | 82.8 | 34.7 | % | ||||||||
Digital | 54.3 | 88.4 | % | 50.8 | 88.8 | % | ||||||||
Technology Brands | 169.1 | 77.0 | % | 174.6 | 68.2 | % | ||||||||
Collectibles | 77.1 | 29.6 | % | 68.6 | 32.3 | % | ||||||||
Other | 22.6 | 27.1 | % | 29.2 | 32.3 | % | ||||||||
Total | $ | 1,024.5 | 29.3 | % | $ | 1,007.9 | 33.1 | % | ||||||
53 Weeks Ended February 3, 2018 |
52 Weeks Ended January 28, 2017 |
|||||||||||||
Gross Profit (in millions): | Gross Profit |
Gross Profit Percent |
Gross Profit |
Gross Profit Percent |
||||||||||
New video game hardware | $ | 163.1 | 9.1 | % | $ | 154.2 | 11.0 | % | ||||||
New video game software | 590.3 | 22.9 | % | 600.4 | 24.1 | % | ||||||||
Pre-owned and value video game products | 977.1 | 45.5 | % | 1,044.1 | 46.3 | % | ||||||||
Video game accessories | 255.0 | 32.5 | % | 235.2 | 34.8 | % | ||||||||
Digital | 162.4 | 85.8 | % | 155.5 | 85.9 | % | ||||||||
Technology Brands | 594.0 | 73.9 | % | 554.6 | 68.1 | % | ||||||||
Collectibles | 208.2 | 32.7 | % | 171.6 | 34.7 | % | ||||||||
Other | 90.0 | 31.3 | % | 93.7 | 31.5 | % | ||||||||
Total | $ | 3,040.1 | 33.0 | % | $ | 3,009.3 | 35.0 | % | ||||||
Schedule III
(in millions)
(unaudited)
Non-GAAP results
The following table reconciles the Company's operating earnings, net income and earnings per share as presented in its unaudited Consolidated Statements of Operations and prepared in accordance with Generally Accepted Accounting Principles ("GAAP") to its adjusted operating earnings, net income and earnings per share.
14 Weeks Ended February 3, 2018 |
13 Weeks Ended January 28, 2017 |
53 Weeks Ended February 3, 2018 |
52 Weeks Ended January 28, 2017 |
|||||||||||||
Technology Brands Adjusted Operating Earnings | ||||||||||||||||
Technology Brands operating (loss) earnings | $ | (359.8 | ) | $ | (12.0 | ) | $ | (315.7 | ) | $ | 44.2 | |||||
Acquisition costs | (5.0 | ) | — | (10.7 | ) | — | ||||||||||
Property, equipment & other asset impairments | 15.5 | 16.6 | 15.5 | 16.6 | ||||||||||||
Goodwill impairment | 32.8 | — | 32.8 | — | ||||||||||||
Intangible impairments | 339.8 | 7.0 | 339.8 | 7.0 | ||||||||||||
Store closure costs | 7.8 | 19.8 | 14.0 | 19.8 | ||||||||||||
Business divestitures and other | — | 2.6 | — | 2.6 | ||||||||||||
Technology Brands adjusted operating earnings | $ | 31.1 | $ | 34.0 | $ | 75.7 | $ | 90.2 | ||||||||
Consolidated Adjusted Operating Earnings | ||||||||||||||||
Operating (loss) earnings | $ | (96.7 | ) | $ | 286.6 | $ | 135.6 | $ | 557.7 | |||||||
Acquisition costs | (5.0 | ) | — | (10.7 | ) | — | ||||||||||
Property, equipment & other asset impairments | 22.5 | 19.4 | 22.5 | 19.4 | ||||||||||||
Goodwill impairments | 32.8 | — | 32.8 | — | ||||||||||||
Intangible impairments | 339.8 | 14.4 | 339.8 | 14.4 | ||||||||||||
Store closure costs | 7.8 | 19.8 | 14.0 | 19.8 | ||||||||||||
Business divestitures and other | 8.6 | 2.9 | 1.3 | 7.0 | ||||||||||||
Adjusted operating earnings | $ | 309.8 | $ | 343.1 | $ | 535.3 | $ | 618.3 | ||||||||
Consolidated Adjusted Net Income | ||||||||||||||||
Net (loss) income | $ | (105.9 | ) | $ | 208.7 | $ | 34.7 | $ | 353.2 | |||||||
Acquisition costs | (5.0 | ) | — | (10.7 | ) | — | ||||||||||
Property, equipment & other asset impairments | 22.5 | 19.4 | 22.5 | 19.4 | ||||||||||||
Goodwill impairment | 32.8 | — | 32.8 | — | ||||||||||||
Intangible impairments | 339.8 | 14.4 | 339.8 | 14.4 | ||||||||||||
Store closure costs | 7.8 | 19.8 | 14.0 | 19.8 | ||||||||||||
Business divestitures and other | 8.6 | 2.9 | 1.3 | 7.0 | ||||||||||||
Tax effect of non-GAAP adjustments | (92.6 | ) | (21.4 | ) | (92.8 | ) | (22.9 | ) | ||||||||
Tax reform | (3.0 | ) | — | (3.0 | ) | — | ||||||||||
Adjusted net income | $ | 205.0 | $ | 243.8 | $ | 338.6 | $ | 390.9 | ||||||||
Adjusted earnings per share | ||||||||||||||||
Basic | $ | 2.02 | $ | 2.39 | $ | 3.34 | $ | 3.78 | ||||||||
Diluted | $ | 2.02 | $ | 2.38 | $ | 3.34 | $ | 3.77 | ||||||||
Dividend per common share | $ | 0.38 | $ | 0.37 | $ | 1.52 | $ | 1.48 | ||||||||
Number of shares used in adjusted calculation | ||||||||||||||||
Basic | 101.5 | 102.1 | 101.4 | 103.4 | ||||||||||||
Diluted | 101.6 | 102.5 | 101.5 | 103.8 | ||||||||||||
Schedule IV
(in millions)
(unaudited)
Non-GAAP results
The following table reconciles the Company's cash flows provided by operating activities as presented in its unaudited Consolidated Statements of Cash Flows and prepared in accordance with GAAP to its free cash flow.
53 weeks ended February 3, 2018 |
52 weeks ended January 28, 2017 |
|||||||
Net cash flows provided by operating activities | $ | 434.9 | $ | 537.1 | ||||
Purchase of property and equipment | (113.4 | ) | (142.7 | ) | ||||
Other investing activities | 3.2 | 5.9 | ||||||
Free cash flow | $ | 324.7 | $ | 400.3 |
ContactMike Loftus Vice President, Global Controller and Investor RelationsGameStop Corp. investorrelations@gamestop.com
Source: Gamestop Corporation