GameStop Corp. Sales Up 13 Percent; Video Game Software Sales Increase 17 Percent; Second Quarter EPS Grows 18% to $0.13 at High End of Projected Range
GRAPEVINE, Texas--(BUSINESS WIRE)--Aug. 17, 2004--GameStop Corp. (NYSE:GME), the nation's largest video game and entertainment software specialty retailer, today reported sales and earnings for the second quarter ended July 31, 2004.
GameStop sales increased 13% to $345.6 million in the second quarter of 2004, compared with $305.7 million in the prior year quarter. Video game software sales were strong, growing 17%, with leading titles such as "NCAA Football 2005" from Electronic Arts, Inc., "Spider-Man 2" from Activision, Inc., and "ESPN NFL 2K5" from Sega of America and Take-Two Interactive, Inc. Comparable store sales declined by 2.4%, in line with expectations.
Net earnings for the second quarter increased to $7.7 million, compared with net earnings of $6.6 million in the prior year quarter. Diluted earnings per share increased 18%, to $0.13 per diluted share, as compared to $0.11 per diluted share in the prior year quarter.
New store sales performance exceeded our expectations, and we opened 77 stores during the quarter, bringing the total number of new stores opened so far this year to 180.
"We are pleased with our second quarter results, and are particularly happy about our earnings being at the high end of our projected range. In addition, as NPD data indicates, GameStop again continued to gain market share," said R. Richard Fontaine, Chairman and Chief Executive Officer. "We experienced strong hardware sales at the beginning of the second quarter due to price cuts on the Microsoft Xbox and Sony PlayStation 2 systems, and our in-store promotional activities; however, unanticipated hardware shortages in late June and July on the PlayStation 2, and to a lesser extent, Xbox, impacted the momentum that we had built earlier in the quarter. We are also very pleased with our continued margin growth and our overall software sales increase of 17%, particularly as we were up against very challenging software comparisons in the prior year's quarter."
Fontaine continued, "We believe we are well positioned to fully maximize the potential of the release of several very strong titles for the third and fourth quarters, which perhaps could be the most robust software line-up in the last five years."
During the second quarter, GameStop completed its previously announced $50.0 million stock buy-back program, acquiring approximately 959,000 shares for $15.0 million at an average price of $15.64 per share.
Guidance for the third quarter assumes comparable store sales will range from +4.0% to +6.0%, with earnings per diluted share between $0.20 and $0.21. We continue to believe that full-year 2004 earnings per diluted share will range from $1.20 to $1.24.
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 August 17, 2004, and will be accessible at (http://www.gamestop.com/investor-relations), where it will be archived until September 1, 2004.
About GameStop Corp.
Headquartered in Grapevine, Texas, 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 1,676 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, 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.
Statements of Operations
(in thousands, except per share data)
13 weeks 13 weeks
ended ended
July 31, 2004 August 2, 2003
--------------- ----------------
Sales $ 345,593 $ 305,674
Cost of sales 238,386 216,691
--------------- ----------------
Gross profit 107,207 88,983
Selling, general and administrative
expenses 85,965 71,262
Depreciation and amortization 8,697 6,872
--------------- ----------------
Operating earnings 12,545 10,849
Interest expense (income), net (194) (207)
--------------- ----------------
Earnings before income
tax expense 12,739 11,056
Income tax expense 5,067 4,450
--------------- ----------------
Net earnings $ 7,672 $ 6,606
=============== ================
Earnings per common share:
Basic $ 0.14 $ 0.12
Diluted $ 0.13 $ 0.11
Weighted average common shares
outstanding:
Basic 56,620 56,764
Diluted 59,533 60,193
Percentage of sales:
--------------------------------------
Sales 100.0% 100.0%
Cost of sales 69.0% 70.9%
--------------- ----------------
Gross profit 31.0% 29.1%
SG&A expenses 24.9% 23.3%
Depreciation and amortization 2.5% 2.2%
--------------- ----------------
Operating earnings 3.6% 3.6%
Interest expense (income), net (0.1)% -%
--------------- ----------------
Earnings before income
tax expense 3.7% 3.6%
Income tax expense 1.5% 1.4%
--------------- ----------------
Net earnings 2.2% 2.2%
=============== ================
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
26 weeks 26 weeks
ended ended
July 31, 2004 August 2, 2003
-------------- ----------------
Sales $ 717,329 $ 627,415
Cost of sales 504,582 452,991
-------------- ----------------
Gross profit 212,747 174,424
Selling, general and administrative
expenses 172,591 139,797
Depreciation and amortization 16,841 13,089
-------------- ----------------
Operating earnings 23,315 21,538
Interest expense (income), net (347) (586)
-------------- ----------------
Earnings before income
tax expense 23,662 22,124
Income tax expense 9,312 8,907
-------------- ----------------
Net earnings $ 14,350 $ 13,217
============== ================
Earnings per common share:
Basic $ 0.25 $ 0.23
Diluted $ 0.24 $ 0.22
Weighted average common shares
outstanding:
Basic 56,805 56,924
Diluted 59,832 60,215
Percentage of sales:
----------------------------------
Sales 100.0% 100.0%
Cost of sales 70.3% 72.2%
--------------- ----------------
Gross profit 29.7% 27.8%
SG&A expenses 24.1% 22.3%
Depreciation and amortization 2.3% 2.1%
--------------- ----------------
Operating earnings 3.3% 3.4%
Interest expense (income), net -% (0.1)%
--------------- ----------------
Earnings before income
tax expense 3.3% 3.5%
Income tax expense 1.3% 1.4%
--------------- ----------------
Net earnings 2.0% 2.1%
=============== ================
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
July 31, 2004 August 2, 2003
-------------- ---------------
ASSETS:
Current assets:
Cash and cash equivalents $ 159,748 $ 144,147
Receivables, net 6,547 6,213
Merchandise inventories 184,059 156,374
Prepaid expenses and other current
assets 14,628 11,054
Prepaid taxes 11,968 13,818
Deferred taxes 7,661 6,034
-------------- --------------
Total current assets 384,611 337,640
-------------- --------------
Property and equipment:
Land 2,000 -
Leasehold improvements 77,042 48,072
Fixtures and equipment 154,557 112,395
-------------- --------------
233,599 160,467
Less accumulated depreciation and
amortization 100,088 68,802
-------------- --------------
Net property and equipment 133,511 91,665
-------------- --------------
Goodwill, net 320,888 320,691
Other noncurrent assets 1,698 1,470
-------------- --------------
Total assets $ 840,708 $ 751,466
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 130,361 $ 120,736
Accrued liabilities 89,965 68,452
-------------- --------------
Total current liabilities 220,326 189,188
Deferred taxes 17,629 5,591
Other long-term liabilities 3,319 3,410
-------------- --------------
Total liabilities 241,274 198,189
-------------- --------------
Stockholders' equity:
Preferred stock - authorized 5,000
shares; no shares issued or outstanding - -
Class A common stock - $.001 par value;
authorized 300,000 shares; 23,483
and 21,349 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 516,813 496,970
Accumulated other comprehensive
income (loss) 125 (75)
Retained earnings 132,437 67,837
Treasury stock, at cost, 3,263 and
910 shares, respectively (50,000) (11,512)
-------------- --------------
Total stockholders' equity 599,434 553,277
-------------- --------------
Total liabilities and stockholders'
equity $840,708 $751,466
============== ==============
Schedule I
GameStop Corp.
Retail Sales Mix
13 weeks 13 weeks
ended ended
July 31, 2004 August 2, 2003
------------- --------------
Video Game Hardware 16% 16%
Video Game Software 65% 61%
Video Game Accessories 14% 12%
PC Software 4% 7%
PC Accessories and Other 1% 4%
CONTACT: GameStop Corp.
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.