Adjusted diluted EPS increases 41%
year-over-year (9% on a GAAP basis); exceeds high end of guidance
by $0.06
Same store sales increase 8.1%
Gross margin rate increases 110 basis
points
GameStop Corp. (NYSE: GME), a global family of specialty retail
brands that makes the most popular technologies affordable and
simple, today reported sales and earnings for the second quarter
ended August 1, 2015.
Paul Raines, chief executive officer, stated, “Results for the
second quarter again exceeded our expectations, reflecting the mix
of sales in our market-leading video game business and the
continuing success of our diversified segments. During the quarter,
we increased the number of Technology Brands stores by 33% and
completed the acquisition of Geeknet, continuing the expansion of
our non-gaming businesses. We are excited about the growth
prospects of these businesses and expect them to deliver sustained
profits over the next several years.
“During the second half of the year, we anticipate momentum in
our core gaming business with the launch of several AAA titles,
complementing growth in our pre-owned segment being fueled by a
continuing shift to next-gen products. We also expect Technology
Brands and collectibles products to contribute meaningful profits
for the balance of the year.”
The following table summarizes the second quarter results for
fiscal 2015 and 2014 (in millions, except per share amounts):
Quarter Ended
*(Adjusted Results)
Aug 1, 2015 Aug 2, 2014
Change Net sales $1,761.9 $1,731.4 1.8% Same
store sales 8.1% 21.9% Operating earnings* $60.8 $36.7 65.7% Net
income* $33.1 $24.6 34.6% Diluted EPS* $0.31 $0.22 40.9%
Q2 2015 Financial
Summary
Total global sales rose 1.8% to $1.76 billion (a 7.4% increase
in constant currency) and consolidated global comparable store
sales increased 8.1% (+10.8% in the U.S. and +1.8%
internationally), successfully overlapping the 25% sales growth and
22% comp achieved in the prior year quarter.
In the video games segments, new hardware sales declined 2.2% (a
3.7% increase in constant currency), new software sales decreased
6.0% (a 0.7% increase in constant currency), while pre-owned sales
increased 0.5% (a 5.1% increase in constant currency) driven by an
acceleration in next-gen sales as PS4 and Xbox One trades and
inventory become a larger part of the overall pre-owned mix.
Sales in the Mobile and Consumer Electronics category rose 26.9%
(a 27.8% increase in constant currency) to $142.2 million, driven
by a 62.3% increase in Technology Brands revenues. During the
quarter, 182 new Technology Brands stores were opened and/or
acquired. As a result, Spring Mobile is now AT&T’s largest
authorized reseller.
Strong sales of collectibles products drove a 37.7% increase (a
48.5% increase in constant currency) in the Other category as we
continued to expand this new offering around the world.
Non-GAAP digital receipts increased 11.1% (a 17.5% increase in
constant currency) to $199.1 million, or $41.6 million of sales on
a GAAP basis. Strong sales of DLC for Witcher 3 and Batman Arkham
Knight were the primary growth drivers during the quarter.
In the second quarter, as a result of non-recurring costs to
complete the Geeknet acquisition and the Technology Brands
expansion, the company recorded one-time charges of $9.1 million,
$7.8 million net of tax benefits, or $0.07 per share. A
reconciliation of non-GAAP adjusted net income to GAAP net income
is included with this release (Schedule III).
Excluding the one-time charges, GameStop’s adjusted net earnings
for the second quarter were $33.1 million, a 34.6% increase over
the prior year quarter. The increase was primarily driven by 110
basis points of margin expansion, primarily in the Mobile and Other
categories. Adjusted diluted earnings per share were $0.31, a 40.9%
increase over the prior year quarter, exceeding the high-end of
guidance by $0.06. Foreign currency exchange rate changes cost
nearly $100 million in sales, but had minimal impact on EPS.
Including the one-time charges, GameStop’s second quarter net
earnings increased 2.8% to $25.3 million, compared to net earnings
of $24.6 million in the prior year quarter. Diluted earnings per
share were $0.24 compared to diluted earnings per share of $0.22 in
the prior year quarter.
Capital Allocation
Update
During the second quarter of 2015, the company repurchased 1.41
million shares at an average price of $43.04 per share, or $60.7
million of stock. Through the first half of the fiscal year,
GameStop has repurchased 2.6 million shares at an average price of
$41.21, or $107.1 million worth of stock. As of the end of the
second quarter, there was $340.2 million remaining on the existing
repurchase authorization.
GameStop’s board of directors also declared a quarterly cash
dividend of $0.36 per common share payable on Sept. 22, 2015, to
shareholders of record as of the close of business on Sept. 9,
2015.
Earnings Guidance
For the third quarter of fiscal 2015, GameStop expects
comparable store sales to range from +1.0% to +4.0%. Diluted
earnings per share are expected to range from $0.53 to $0.60,
compared to adjusted diluted earnings per share of $0.57 in the
prior year quarter.
For fiscal year 2015, the company is raising its previously
announced full year adjusted diluted earnings per share guidance
range from $3.63 to $3.83 to $3.66 to $3.86 to account for the
reduction in shares outstanding. Full year comparable store sales
are now expected to range from +2.0% to +7.0%.
Note: Guidance only includes the effect of the shares
repurchased through the second quarter of 2015.
Conference Call
Information
A conference call with GameStop Corp.’s management is scheduled
for Aug. 27, 2015 at 4:00 p.m. CDT to discuss the company’s
financial results. The phone number for the call is 888-663-2241
and the pass code is 1526961. This call, along with supplemental
information, can also be accessed at GameStop Corp.’s investor
relations home page at http://investor.GameStop.com/. The
conference call will be archived for two months on GameStop’s
corporate website.
About GameStop
GameStop Corp. (NYSE: GME), a Fortune 500 and S&P 500
company headquartered in Grapevine, Texas, is a global,
multichannel video game, consumer electronics and wireless services
retailer. GameStop operates more than 6,800 stores across 14
countries. The company’s consumer product network also includes
www.gamestop.com; www.Kongregate.com, a leading browser-based game
site; Game Informer® magazine, the world’s leading print and
digital video game publication and the recently acquired Geeknet,
Inc., parent company of ThinkGeek, www.thinkgeek.com, the premier
retailer for the global geek community featuring exclusive and
unique video game and pop culture products. In addition, our
Technology Brands segment includes Simply Mac and Spring Mobile
stores. Simply Mac, www.simplymac.com, operates 72 stores, selling
the full line of Apple products, including laptops, tablets, and
smartphones and offering Apple certified warranty and repair
services. Spring Mobile, http://springmobile.com, sells post-paid
AT&T services and wireless products through its 590 AT&T
branded stores and offers pre-paid wireless services, devices and
related accessories through its 69 Cricket branded stores in select
markets in the U.S.
General information about GameStop Corp. can be obtained at the
company's corporate website. Follow GameStop on Twitter @
www.twitter.com/GameStop and find GameStop on Facebook @
www.facebook.com/GameStop.
Non-GAAP Measures
As a supplement to our financial results presented in accordance
with U.S. generally accepted accounting principles (GAAP), GameStop
uses certain non-GAAP measures, such as digital receipts and
constant currency, to provide a clearer perspective of the current
operating performance of the company. GameStop defines digital
receipts as the full amount paid by the customer for digital
content at the time of sale and/or the value attributed to digital
content when physical and digital products are sold combined.
Results reported as constant currency exclude the impact of
fluctuations in foreign currency exchange rates by converting our
local currency financial results using the prior period exchange
rates and comparing these adjusted amounts to our current period
reported results. Our definition and calculation of constant
currency information may differ from that of other companies.
Non-GAAP financial measures should be viewed in addition to, and
not as an alternative for, the company's reported GAAP financial
results.
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 the third quarter and fiscal 2015, 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.
GameStop undertakes no obligation to publicly update or revise any
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 console
hardware and accessories; the timing of release and consumer demand
for new and pre-owned video game titles; the risks associated with
international operations, wireless industry partnerships and
operations; the integration of acquisitions; the impact of
increased competition and changing technology in the video game
industry, including browser and mobile games and alternative
methods of distribution; and economic, regulatory and other events,
including litigation, that could reduce or impact consumer demand
or affect the company’s business. 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 Jan. 31, 2015 filed
with the SEC and available at the SEC's Internet site at
http://www.sec.gov or http://investor.GameStop.com.
GameStop Corp. Condensed Consolidated
Statements of Operations (in millions, except per share
data) (unaudited) 13 weeks
13 weeks ended ended Aug 1, 2015 Aug 2, 2014 Net sales $
1,761.9 $ 1,731.4 Cost of sales 1,181.4
1,180.5 Gross profit 580.5 550.9 Selling,
general and administrative expenses 490.8 475.4 Depreciation and
amortization 38.0 38.8 Operating
earnings
51.7
36.7
Interest expense, net 5.6 1.1
Earnings before income tax expense 46.1 35.6
Income tax expense 20.8 11.0 Net
income $ 25.3 $ 24.6 Net income per common
share: Basic $ 0.24 $ 0.22 Diluted $ 0.24 $ 0.22 Dividends
per common share $ 0.36 $ 0.33 Weighted average common
shares outstanding: Basic 106.5 113.6 Diluted 107.2 114.3
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 67.1 %
68.2 % Gross profit 32.9 % 31.8 % Selling, general
and administrative expenses 27.8 % 27.5 % Depreciation and
amortization 2.2 % 2.2 % Operating earnings
2.9 % 2.1 % Interest expense, net 0.3 % 0.1 %
Earnings before income tax expense 2.6 % 2.0 %
Income tax expense 1.2 % 0.6 % Net income
1.4 % 1.4 %
GameStop Corp.
Condensed Consolidated Statements of Operations (in
millions, except per share data) (unaudited)
26 weeks 26 weeks ended ended Aug 1, 2015 Aug
2, 2014 Net sales $ 3,822.5 $ 3,727.7 Cost of sales
2,603.0 2,550.4 Gross profit 1,219.5
1,177.3 Selling, general and administrative expenses 970.1
956.4 Depreciation and amortization 73.8 78.3
Operating earnings 175.6 142.6 Interest
expense, net 11.0 1.7
Earnings before income tax expense 164.6 140.9 Income tax
expense 65.5 48.3 Net income $
99.1 $ 92.6 Net income per common share: Basic
$ 0.92 $ 0.81 Diluted $ 0.92 $ 0.80 Dividends per common
share $ 0.72 $ 0.66 Weighted average common shares
outstanding: Basic 107.2 114.3 Diluted 107.8 115.1
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 68.1 %
68.4 % Gross profit 31.9 % 31.6 % Selling, general
and administrative expenses 25.4 % 25.7 % Depreciation and
amortization 1.9 % 2.1 % Operating earnings
4.6 % 3.8 % Interest expense, net 0.3 % 0.0 %
Earnings before income tax expense 4.3 % 3.8 %
Income tax expense 1.7 % 1.3 % Net income
2.6 % 2.5 %
GameStop Corp.
Condensed Consolidated Balance Sheets (in millions)
(unaudited) Aug 1, Aug 2, 2015
2014
ASSETS: Current assets: Cash and cash equivalents $
136.2 $ 193.0 Receivables, net 118.3 91.2 Merchandise inventories,
net 988.3 1,061.0 Prepaid expenses and other current assets 192.9
181.9 Deferred income taxes 65.9 59.2 Total current
assets 1,501.6 1,586.3 Property and equipment:
Land 17.7 21.0 Buildings & leasehold improvements 627.9 621.9
Fixtures and equipment 926.3 864.0 Total property and
equipment 1,571.9 1,506.9 Less accumulated depreciation and
amortization 1,108.6 1,057.2 Net property and
equipment 463.3 449.7 Goodwill 1,472.0 1,420.6
Other noncurrent assets 401.9 306.9 Total assets $
3,838.8 $ 3,763.5
LIABILITIES AND STOCKHOLDERS'
EQUITY: Current liabilities: Accounts payable $ 481.1 $ 460.8
Accrued liabilities 847.4 743.1 Income taxes payable 3.5 29.7
Current portion of debt 12.5 214.1 Total current
liabilities 1,344.5 1,447.7 Other long-term
liabilities 527.0 134.4 Total liabilities 1,871.5
1,582.1 Stockholders' equity 1,967.3 2,181.4
Total liabilities and stockholders' equity $ 3,838.8 $ 3,763.5
GameStop Corp. Schedule I
Sales Mix (unaudited)
13 Weeks Ended 13 Weeks
Ended Aug 1, 2015 Aug 2, 2014 Net
Percent Net Percent Sales of
Total Sales of Total Net Sales (in millions):
New video game hardware $ 324.9 18.4 % $ 332.3 19.2 % New
video game software 467.2 26.5 % 497.0 28.7 % Pre-owned and value
video game products 560.8 31.8 % 558.0 32.2 % Video game
accessories 125.8 7.1 % 107.5 6.2 % Digital 41.6 2.4 % 52.3 3.0 %
Mobile and consumer electronics 142.2 8.1 % 112.1 6.5 % Other 99.4
5.7 % 72.2 4.2 % Total $ 1,761.9 100.0
% $ 1,731.4 100.0 %
Schedule II
Gross Profit Mix (unaudited) 13 Weeks
Ended 13 Weeks Ended Aug 1, 2015 Aug 2,
2014 Gross Gross Gross Profit
Gross Profit Profit Percent
Profit Percent Gross Profit (in millions):
New video game hardware $ 33.4 10.3 % $ 31.6 9.5 % New video
game software 110.8 23.7 % 115.7 23.3 % Pre-owned and value video
game products 257.8 46.0 % 262.1 47.0 % Video game accessories 45.7
36.3 % 41.9 39.0 % Digital 32.8 78.8 % 34.0 65.0 % Mobile and
consumer electronics 64.5 45.4 % 40.5 36.1 % Other 35.5 35.7 % 25.1
34.8 % Total $ 580.5 32.9 % $ 550.9 31.8 %
GameStop Corp. Schedule III (in
millions) (unaudited)
Non-GAAP
results
The following table reconciles the
company's 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 non-GAAP net income and earnings per share, which excludes
the effects of acquisition costs.
13 Weeks Ended 13 Weeks
Ended 26 Weeks Ended 26
Weeks Ended Aug. 1, 2015 Aug. 2, 2014 Aug. 1,
2015 Aug. 2, 2014 GAAP Net Income $ 25.3 $ 24.6 $
99.1 $ 92.6 One-time acquisition costs: Geeknet 5.6 - 5.6 -
Technology Brands 2.2 - 2.2 -
Non-GAAP Net Income $ 33.1 $ 24.6 $ 106.9 $ 92.6
Non-GAAP earnings per share Basic $ 0.31 $ 0.22 $ 1.00 $
0.81 Diluted $ 0.31 $ 0.22 $ 0.99 $ 0.80 Number of shares
used in non-GAAP calculation Basic 106.5 113.6 107.2 114.3 Diluted
107.2 114.3 107.8 115.1
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150827005914/en/
Matt HodgesVice President, Public and Investor RelationsGameStop
Corp.(817) 424-2130
GameStop (NYSE:GME)
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