GameStop Reports Record Second Quarter 2008 Results
Total Sales Increase 35%; Comparable Store Sales Increase 20%
Net Earnings Increase 162% Leading to 2nd Quarter EPS Above
Guidance
Full Year EPS Guidance Boosted
GRAPEVINE, Texas--(BUSINESS WIRE)--Aug. 21, 2008--GameStop Corp. (NYSE: GME), the world's largest video game and entertainment software retailer, today reported sales and earnings for the second quarter ended August 2, 2008.
Net earnings were $57.2 million for the second quarter of 2008, compared to net earnings of $21.8 million for the second quarter of 2007, an increase of 162.1%. Diluted earnings per share were $0.34, compared to $0.13 in the prior year quarter, exceeding the high-end of previously released guidance by $0.06 per share.
GameStop sales increased 34.8% to $1,804.4 million in the second quarter, compared to $1,338.2 million in the prior year quarter. Comparable store sales increased 20.0% during the second quarter as new video game software sales grew 43%. The top five selling games during the quarter were Take Two's Grand Theft Auto IV, Metal Gear Solid 4: Guns of the Patriots from Konami, NCAA Football 09 by Electronic Arts, Nintendo's Wii Fit and Battlefield: Bad Company from Electronic Arts.
R. Richard Fontaine, Chairman and Chief Executive Officer, stated, "In the second quarter, we produced record revenues in each of the geographical regions where we operate. By prioritizing our investments and focusing our resources, GameStop continues to significantly outperform the specialty retail segment as a whole, when comparing top-line growth, comparable store sales, and net earnings growth."
Fontaine continued, "We are raising our full year 2008 EPS guidance based on growth of the worldwide installed base and our expectations of a strong second half of the year. We have consistently delivered superior returns to our shareholders by driving value through our new and used business model, generating exceptional returns from our new store expansion and we fully expect this performance to continue."
Daniel DeMatteo, GameStop's Vice Chairman and Chief Operating Officer, indicated, "GameStop customers not only have the benefit of our convenient locations, associates with unmatched product knowledge, and an attractive buy-sell-trade model, but an exceptional spectrum of games for all players. In fact, the National Retail Federation recently named GameStop as the top 'Power Player' Entertainment Retailer in the US.
"Expected releases in the second half of the year include great sequels like Guitar Hero: World Tour and Call of Duty: World at War, new IP such as LEGO Batman, Little Big Planet and Spore, as well as second generation hits like Fable 2, Rock Band 2 and Gears of War 2," said DeMatteo.
Updated Guidance
Based on the stronger than expected results in the second quarter of 2008 and increased confidence in the second half video game line-up, GameStop is increasing its fiscal 2008 guidance.
Full year diluted earnings per share are now forecast to range from $2.45 to $2.50, representing a +36% to +39% growth rate over last year. Comparable store sales are projected to increase between +12% and +14% for the full year, with total sales growing between +23% and +25%.
For the third quarter of fiscal 2008, GameStop is forecasting diluted earnings per share to range from $0.36 to $0.38, representing EPS growth of +9% to +15%. Comparable store sales in the third quarter are expected to range from flat to +2%.
For the fourth quarter of fiscal 2008, GameStop is forecasting diluted earnings per share to range from $1.37 to $1.40, representing EPS growth of +20% to +23%. Comparable store sales in the fourth quarter are expected to range from +8% to +10%.
GameStop continues to believe that fiscal 2009 earnings per share will grow at least 25%. This guidance is based on our analysis that the unprecedented growth of new video game hardware during 2007 and 2008, combined with strong tie ratios, significant industry investment, and a great title line-up will drive new video game software sales to double-digit growth resulting in higher profitability for the company.
Note that guidance does not include debt retirement costs.
Conference Call and Webcast Information
A conference call with GameStop Corp.'s management is scheduled for August 21, 2008 at 11:00 AM ET to discuss the second quarter sales and earnings results. The conference call will be simulcast on the Internet at http://investor.gamestop.com. The conference call will be archived on the website until September 4, 2008.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. is the world's largest video game and entertainment software retailer. The company operates 5,557 retail stores in 16 countries worldwide. The company also operates two e-commerce sites, GameStop.com and EBgames.com, and publishes Game Informer(R) magazine, a leading multi-platform video game publication. GameStop Corp. sells new and used video game software, hardware and accessories for video game systems from Sony, Nintendo, and Microsoft. In addition, the company sells PC entertainment software, related accessories and other merchandise. General information on GameStop Corp. can be obtained at the company's corporate website: http://www.gamestopcorp.com.
Safe Harbor
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, the outlook for fiscal 2008 and beyond, future financial and operating results, projected store openings, the company's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of GameStop's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the inability to obtain sufficient quantities of product to meet consumer demand, including Nintendo's Wii; the timing of release of video game titles for next generation consoles; the risks associated with expanded international operations; and economic and other events that could reduce or impact consumer demand. Additional factors that could cause GameStop's results to differ materially from those described in the forward-looking statements can be found in GameStop's Annual Report on Form 10-K for the fiscal year ended February 2, 2008 filed with the SEC and available at the SEC's Internet site at http://www.sec.gov/ or http://investor.gamestop.com.
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
13 weeks 13 weeks
ended ended
August 2, 2008 August 4, 2007
-------------- --------------
Sales $ 1,804,420 $ 1,338,193
Cost of sales 1,320,297 976,894
-------------- --------------
Gross profit 484,123 361,299
Selling, general and administrative
expenses 347,745 278,434
Depreciation and amortization 36,309 32,118
-------------- --------------
Operating earnings 100,069 50,747
Interest expense, net 9,211 13,346
Debt extinguishment expense -- 2,027
-------------- --------------
Earnings before income
tax expense 90,858 35,374
Income tax expense 33,695 13,564
-------------- --------------
Net earnings $ 57,163 $ 21,810
============== ==============
Earnings per common share:
Basic $ 0.35 $ 0.14
Diluted $ 0.34 $ 0.13
Weighted average common shares
outstanding:
Basic 163,390 158,438
Diluted 168,067 164,769
Percentage of Sales:
---------------------------------------
Sales 100.0% 100.0%
Cost of sales 73.2% 73.0%
-------------- --------------
Gross profit 26.8% 27.0%
SG&A expenses 19.3% 20.8%
Depreciation and amortization 2.0% 2.4%
-------------- --------------
Operating earnings 5.5% 3.8%
Interest expense, net 0.5% 1.0%
Debt extinguishment expense 0.0% 0.2%
-------------- --------------
Earnings before income
tax expense 5.0% 2.6%
Income tax expense 1.8% 1.0%
-------------- --------------
Net earnings 3.2% 1.6%
============== ==============
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
26 weeks 26 weeks
ended ended
August 2, 2008 August 4, 2007
--------------- --------------
Sales $ 3,618,037 $ 2,617,176
Cost of sales 2,660,508 1,907,108
--------------- --------------
Gross profit 957,529 710,068
Selling, general and administrative
expenses 676,412 535,550
Depreciation and amortization 71,145 63,153
--------------- --------------
Operating earnings 209,972 111,365
Interest expense, net 17,699 27,462
Debt extinguishment expense 2,331 8,751
--------------- --------------
Earnings before income
tax expense 189,942 75,152
Income tax expense 70,654 28,619
--------------- --------------
Net earnings $ 119,288 $ 46,533
=============== ==============
Earnings per common share:
Basic $ 0.73 $ 0.30
Diluted $ 0.71 $ 0.29
Weighted average common shares
outstanding:
Basic 162,607 155,938
Diluted 167,722 163,013
Percentage of Sales:
--------------------------------------
Sales 100.0% 100.0%
Cost of sales 73.5% 72.9%
--------------- --------------
Gross profit 26.5% 27.1%
SG&A expenses 18.7% 20.4%
Depreciation and amortization 2.0% 2.4%
--------------- --------------
Operating earnings 5.8% 4.3%
Interest expense, net 0.5% 1.1%
Debt extinguishment expense 0.1% 0.3%
--------------- --------------
Earnings before income
tax expense 5.2% 2.9%
Income tax expense 1.9% 1.1%
--------------- --------------
Net earnings 3.3% 1.8%
=============== ==============
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
August 2, August 4,
2008 2007
--------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $ 539,898 $ 349,277
Receivables, net 60,966 29,798
Merchandise inventories 970,057 713,836
Prepaid expenses and other current assets 68,470 51,951
Prepaid taxes 58,689 74,952
Deferred taxes 26,893 35,979
--------- ---------
Total current assets 1,724,973 1,255,793
--------- ---------
Property and equipment:
Land 12,033 11,298
Buildings & leasehold improvements 414,896 334,904
Fixtures and equipment 583,734 477,492
--------- ---------
Total property and equipment 1,010,663 823,694
Less accumulated depreciation and amortization 485,665 349,927
--------- ---------
Net property and equipment 524,998 473,767
--------- ---------
Goodwill, net 1,447,572 1,402,845
Other noncurrent assets 74,854 49,100
--------- ---------
Total assets $3,772,397 $3,181,505
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 692,098 $ 517,233
Accrued liabilities 389,009 339,940
Note payable, current portion -- 12,173
--------- ---------
Total current liabilities 1,081,107 869,346
Other long-term liabilities 82,299 72,492
Senior fixed and floating rate notes payable,
net of discount 545,220 693,993
--------- ---------
Total liabilities 1,708,626 1,635,831
--------- ---------
Stockholders' equity:
Preferred stock - authorized 5,000 shares; no
shares
issued or outstanding -- --
Class A common stock - $.001 par value;
authorized 300,000 shares;
163,653 and 158,993 shares issued and
outstanding, respectively 164 159
Additional paid-in-capital 1,288,727 1,145,706
Accumulated other comprehensive income 33,384 19,359
Retained earnings 741,496 380,450
--------- ---------
Total stockholders' equity 2,063,771 1,545,674
--------- ---------
Total liabilities and stockholders'
equity $3,772,397 $3,181,505
========= =========
GameStop Corp.
Schedule I
Sales Mix
13 Weeks Ended 13 Weeks Ended
August 2, 2008 August 4, 2007
------------------ ------------------
Percent Percent
Sales of Total Sales of Total
--------- -------- -------- ---------
Sales (in millions):
New video game hardware $ 379.7 21.0% $ 293.8 22.0%
New video game software 705.0 39.1% 494.2 36.9%
Used video game products 471.5 26.1% 357.3 26.7%
Other 248.2 13.8% 192.9 14.4%
--------- -------- -------- ---------
Total $ 1,804.4 100.0% $ 1,338.2 100.0%
========= ======== ======== =========
======================================================================
GameStop Corp.
Schedule II
Gross Profit Mix
13 Weeks Ended 13 Weeks Ended
August 2, 2008 August 4, 2007
------------------ ------------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
--------- -------- -------- ---------
Gross Profit (in millions):
New video game hardware $ 22.6 6.0% $ 21.5 7.3%
New video game software 145.3 20.6% 100.2 20.3%
Used video game products 234.1 49.7% 173.2 48.5%
Other 82.1 33.1% 66.4 34.4%
--------- --------
Total $ 484.1 26.8% $ 361.3 27.0%
========= ========
CONTACT: Media Contact:
Chris Olivera
Vice President,
Corporate Communications
GameStop Corp.
(817) 424-2130
or
Investor Contact:
Matt Hodges
Director,
Investor Relations
GameStop Corp.
(817) 424-2130
SOURCE: GameStop Corp.