Company reiterates full year EPS guidance of
$3.66 to $3.86
Gross margin rate expands by 280 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 third quarter
ended October 31, 2015.
The following table summarizes the third quarter results for
fiscal 2015 and 2014 (in millions, except per share amounts):
Quarter Ended
*(Adjusted Results) Oct 31, 2015
Nov 1, 2014 Change Net
sales $2,016.3 $2,092.2 (3.6)% Same store sales (1.1)% (2.3)% Net
income* $57.0 $64.3 (11.4)% Diluted EPS* $0.54 $0.57 (5.3)%
Paul Raines, chief executive officer, stated, “Our third quarter
results were at the low end of our guidance range due to lower than
expected new software and hardware sales and delays in Technology
Brands store openings; however, our expectations for the full year
have not changed. Looking ahead to the fourth quarter, a solid
slate of new video games, coupled with contributions from our
diversified AT&T, Apple and ThinkGeek businesses and our
in-store collectibles offerings are expected to drive our fourth
quarter results; therefore, we are reiterating our full year
earnings per share guidance range of $3.66 to $3.86.”
Q3 2015 Financial
Summary
Total global sales decreased 3.6% to $2.0 billion (a 1.2%
increase in constant currency) and consolidated global comparable
store sales declined 1.1% (-1.7% in the U.S. and +0.3%
internationally). Foreign currency exchange rate changes negatively
impacted sales by approximately $100 million and earnings per share
by $0.02.
In the new video game segments, new hardware sales declined
20.4% (a 15.4% decrease in constant currency), while new software
sales decreased 9.3% (a 4.2% decrease in constant currency) due to
the tough overlap of Destiny and Super Smash Bros. in Q3 2014.
Pre-owned sales increased 0.6% (a 4.9% increase in constant
currency) driven by growth in PlayStation 4 and Xbox One pre-owned
sales. Excluding the impact of foreign currency changes, this is
the seventh consecutive quarter of positive pre-owned growth.
Technology Brands revenues increased 64.2%, driving a 31.1%
sales increase (a 31.7% increase in constant currency) in the
Mobile and Consumer Electronics category. Overall, this category
contributed 14.0% of the company’s third quarter gross profit
dollars, with an 81.2% increase in gross profit dollars. During the
quarter, 105 new Technology Brands stores were opened and/or
acquired.
Sales in the Other category grew 60.8% (a 69.8% increase in
constant currency), driven by a nearly 400% sales increase of
collectibles merchandise. Sales of collectibles merchandise,
including ThinkGeek, are on track to reach the company’s goal of
$300 million in fiscal 2015. Collectibles also drove 150 basis
points of margin expansion in the Other category.
Non-GAAP digital receipts increased 8.7% (a 13.8% increase in
constant currency) to $228.6 million, driven by sales of Destiny:
The Taken King. GAAP digital sales totaled $40.0 million in the
quarter. Based on year-to-date results, the digital category is on
track to surpass $1 billion in receipts in fiscal 2015.
In the third quarter, as a result of non-recurring
acquisition-related costs, the company recorded one-time charges of
$1.6 million, $1.1 million net of tax benefits, or $0.01 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 third quarter were $57.0 million, or adjusted diluted
earnings per share of $0.54, compared to adjusted net earnings of
$64.3 million, or adjusted diluted earnings per share of $0.57, in
the prior year quarter.
Including the one-time charges, GameStop’s third quarter net
earnings were $55.9 million, or diluted earnings per share of
$0.53, compared to net earnings of $56.4 million, or diluted
earnings per share of $0.50, in the prior year quarter.
Capital Allocation
Update
During the third quarter of 2015, the company repurchased $44.9
million of common stock at an average price of $43.85 per share.
Through the first three quarters of the fiscal year, GameStop has
repurchased $152.0 million worth of common stock at an average
price of $41.95 and is on target to repurchase at least $200
million in its fiscal year. As of the end of the third quarter,
there was $295.3 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 Dec. 15, 2015, to
shareholders of record as of the close of business on Dec. 3,
2015.
Earnings Guidance
For the fourth quarter of fiscal 2015, GameStop expects
comparable store sales to range from -1.0% to +6.0%. Diluted
earnings per share are expected to range from $2.12 to $2.32,
compared to adjusted diluted earnings per share of $2.15 in the
prior year quarter.
For the full year, the company is reiterating its full year
adjusted diluted earnings per share guidance range of $3.66 to
$3.86. Incorporating third quarter results, full year comparable
store sales are now expected to range from +2.0% to +6.0%.
Note: Guidance only includes the effect of the shares
repurchased through the third quarter of 2015.
Conference Call
Information
A conference call with GameStop Corp.’s management is scheduled
for Nov. 23, 2015 at 10:00 a.m. CT to discuss the company’s
financial results. The phone number for the call is 888-599-8687
and the pass code is 510437. 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 6,900 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 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 76
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 687
AT&T branded stores and offers pre-paid wireless services,
devices and related accessories through its 71 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 fourth 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 Oct 31, 2015 Nov 1, 2014 Net
sales $ 2,016.3 $ 2,092.2 Cost of sales 1,360.7
1,470.0 Gross profit 655.6 622.2
Selling, general and administrative
expenses
525.5 494.3 Depreciation and amortization 39.4
38.1 Operating earnings 90.7 89.8 Interest
expense, net 6.5 3.1
Earnings before income tax expense 84.2 86.7 Income tax
expense 28.3 30.3 Net income $
55.9 $ 56.4 Net income per common share: Basic
$ 0.53 $ 0.50 Diluted $ 0.53 $ 0.50 Dividends per common
share $ 0.36 $ 0.33
Weighted average common shares
outstanding:
Basic 105.4 111.9 Diluted 106.1 112.9
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 67.5 %
70.3 % Gross profit 32.5 % 29.7 %
Selling, general and administrative
expenses
26.1 % 23.6 % Depreciation and amortization 1.9 % 1.8
% Operating earnings 4.5 % 4.3 % Interest expense,
net 0.3 % 0.2 % Earnings before income
tax expense 4.2 % 4.1 % Income tax expense 1.4 %
1.4 % Net income 2.8 % 2.7 %
GameStop Corp. Condensed Consolidated Statements
of Operations (in millions, except per share data)
(unaudited) 39 weeks 39 weeks
ended ended Oct 31, 2015 Nov 1, 2014 Net sales $ 5,838.8 $
5,819.9 Cost of sales 3,963.7 4,020.4
Gross profit 1,875.1 1,799.5
Selling, general and administrative
expenses
1,495.6 1,450.7 Depreciation and amortization 113.2
116.4 Operating earnings 266.3 232.4
Interest expense, net 17.5 4.8
Earnings before income tax expense 248.8 227.6 Income
tax expense 93.8 78.6 Net income
$ 155.0 $ 149.0 Net income per common share:
Basic $ 1.45 $ 1.31 Diluted $ 1.45 $ 1.30 Dividends per
common share $ 1.08 $ 0.99
Weighted average common shares
outstanding:
Basic 106.6 113.5 Diluted 107.2 114.4
Percentage of Net
Sales:
Net sales 100.0 % 100.0 % Cost of sales 67.9 %
69.1 % Gross profit 32.1 % 30.9 %
Selling, general and administrative
expenses
25.6 % 24.9 % Depreciation and amortization 1.9 % 2.0
% Operating earnings 4.6 % 4.0 % Interest expense,
net 0.3 % 0.1 % Earnings before income
tax expense 4.3 % 3.9 % Income tax expense 1.6 %
1.3 % Net income 2.7 % 2.6 %
GameStop Corp.
Condensed Consolidated Balance Sheets (in millions)
(unaudited) Oct 31, Nov 1, 2015 2014
ASSETS:
Current assets: Cash and cash equivalents $ 186.2 $ 374.0
Receivables, net 185.5 116.9 Merchandise inventories, net 1,856.3
1,714.4 Prepaid expenses and other current assets 200.5 179.3
Deferred income taxes 65.9 59.1 Total current assets
2,494.4 2,443.7 Property and equipment: Land
17.6 20.1 Buildings & leasehold improvements 647.0 625.1
Fixtures and equipment 890.8 890.8 Total property and
equipment 1,555.4 1,536.0 Less accumulated depreciation and
amortization 1,077.9 1,071.0 Net property and
equipment 477.5 465.0 Goodwill 1,479.2 1,408.5
Other noncurrent assets 383.9 324.4 Total assets $
4,835.0 $ 4,641.6
LIABILITIES AND STOCKHOLDERS'
EQUITY: Current liabilities: Accounts payable $ 1,461.1 $
1,316.1 Accrued liabilities 876.4 814.6 Income taxes payable 33.3
16.9 Current portion of debt 0.9 3.8 Total current
liabilities 2,371.7 2,151.4 Other long-term
liabilities 171.7 131.4 Long-term debt 350.0 350.2
Total liabilities 2,893.4 2,633.0 Stockholders' equity
1,941.6 2,008.6 Total liabilities and stockholders'
equity $ 4,835.0 $ 4,641.6
GameStop Corp.
Schedule I Sales Mix (unaudited) 13
Weeks Ended 13 Weeks Ended Oct 31, 2015 Nov 1,
2014 Net Percent Net Percent
Sales of Total Sales of Total Net Sales
(in millions): New video game hardware $ 358.1 17.8 % $
449.7 21.5 % New video game software 674.5 33.5 % 743.7 35.5 %
Pre-owned and value video game products 502.2 24.9 % 499.3 23.9 %
Video game accessories 138.0 6.8 % 132.6 6.4 % Digital 40.0 2.0 %
54.9 2.6 % Mobile and consumer electronics 165.2 8.2 % 126.0 6.0 %
Other 138.3 6.8 % 86.0 4.1 % Total $
2,016.3 100.0 % $ 2,092.2 100.0 %
Schedule II Gross Profit
Mix (unaudited) 13 Weeks Ended 13 Weeks
Ended Oct 31, 2015 Nov 1, 2014 Gross
Gross Gross Profit Gross Profit
Profit Percent Profit Percent
Gross Profit (in millions): New video game hardware $ 38.6
10.8 % $ 48.4 10.8 % New video game software 165.8 24.6 % 172.7
23.2 % Pre-owned and value video game products 231.2 46.0 % 237.8
47.6 % Video game accessories 50.4 36.5 % 49.9 37.6 % Digital 31.5
78.8 % 35.2 64.1 % Mobile and consumer electronics 91.5 55.4 % 50.5
40.1 % Other 46.6 33.7 % 27.7 32.2 % Total $ 655.6
32.5 % $ 622.2 29.7 %
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 business divestitures and acquisition costs.
13 Weeks
Ended 13 Weeks Ended 39 Weeks Ended 39 Weeks
Ended Oct. 31, 2015 Nov. 1, 2014 Oct. 31,
2015 Nov. 1, 2014 GAAP Net Income $ 55.9 $ 56.4 $
155.0 $ 149.0 Acquisition costs 1.0 - 6.6 - Business
divestitures 0.1 7.9 2.3 7.9
Non-GAAP Net Income $ 57.0 $ 64.3 $ 163.9 $ 156.9
Non-GAAP earnings per share Basic $ 0.54 $ 0.57 $
1.54 $ 1.38 Diluted $ 0.54 $ 0.57 $ 1.53 $ 1.37 Number of
shares used in non-GAAP calculation Basic 105.4 111.9 106.6 113.5
Diluted 106.1 112.9 107.2 114.4
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version on businesswire.com: http://www.businesswire.com/news/home/20151123005256/en/
Matt HodgesVice President, Public and Investor RelationsGameStop
Corp.(817) 424-2130
GameStop (NYSE:GME)
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