GameStop Corp. Comparable Sales Up 28.7%; First Quarter 2002 EPS Exceeds Estimates; Guidance for Strong Second Quarter
GameStop sales increased 34.8% to $271.4 million in the first quarter of 2002, compared with $201.4 million in the prior year quarter. Sales growth resulted from a 28.7% increase in comparable store sales, as well as the sales from 38 new stores added during the quarter. The increase in comparable store sales was due to solid performance throughout the video game category. It was fueled by the continued strength in existing Sony PlayStation 2 and Nintendo Game Boy Advance systems, as well as two new hardware systems, Microsoft's Xbox and Nintendo's GameCube, which both launched in November 2001.
Net earnings for the first quarter totaled $4.9 million, or $0.08 per share, compared with a net loss of $7.2 million, or ($0.20) per share, in the prior year quarter. On a pro forma basis, GameStop earned $0.09 per share in the first quarter, as compared to a net loss of ($0.03) per share in the prior year quarter, when considering adjustments for excluding interest on debt repaid with GameStop's initial public offering, $0.9 million and $5.8 million, respectively, and for ceasing to amortize its goodwill in the first quarter of 2002, in accordance with recently-issued accounting pronouncements, $2.8 million for the prior year quarter. These results for the quarter exceeded analyst consensus estimates.
For the quarter, EBITDA rose to $13.8 million from $1.8 million in the prior year quarter.
R. Richard Fontaine, Chairman & Chief Executive Officer, commented, "We are pleased with our exceptional first quarter results. As expected, strong software sales followed our fourth quarter record-setting hardware sales, as gamers sought out new additions to their growing collections. Fiscal 2002 continues to look very positive as the total installed hardware base continues to grow at an unprecedented rate with strong software titles anticipated on all platforms."
The outlook for the second quarter was strong even before the recently announced price reductions on hardware. As has been the case historically, the increase in hardware sales in the second quarter should improve results slightly, but mainly help drive software sales in the quarters which follow. Based on improved gross margins (owing to a better ratio of software to hardware sales) and better expense leverage, we expect second quarter earnings to be between $0.06 to $0.07 per share. Comparable sales are expected to be 15%.
Guidance for the third and fourth quarters remains unchanged and will be addressed again in August, when the company has more visibility into the new products, which will determine seasonal expectations.
A conference call with GameStop Corp.'s management will be simulcast on the Web at (http://www.gamestop.com) beginning at 5:00 p.m. ET on May 20, 2002, and will be accessible at (http://www.gamestop.com/investor-relations), where it will be archived until June 2, 2002.
About GameStop Corp.Headquartered in Grapevine, Texas, GameStop Corp. (NYSE:GME), is the nation's largest video game and entertainment software specialty retailer. The company operates 1,068 retail stores throughout 49 states, the District of Columbia and Puerto Rico, under the GameStop(R), Babbage's(R), Software Etc.(TM) and FuncoLand(R) brands. In addition, the company owns a commerce-enabled Web property, GameStop.com, and Game Informer 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.
General information on GameStop Corp. can be obtained via the Internet by visiting the company's corporate Web site: http://www.gamestop.com/investor-relations.
SAFE HARBORThis 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, 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, 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. 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 of dollars, except per share data)
13 weeks 13 weeks
ended ended
May 4, 2002 May 5, 2001
----------- -----------
Sales $ 271,405 $ 201,355
Cost of sales 202,314 153,347
----------- -----------
Gross profit 69,091 48,008
Selling, general and administrative
expenses 55,257 46,190
Depreciation and amortization 5,120 4,459
Amortization of goodwill -- 2,781
----------- -----------
Operating earnings (loss) 8,714 (5,422)
Interest expense, net 493 5,803
----------- -----------
Earnings (loss) before income
tax expense (benefit) 8,221 (11,225)
Income tax expense (benefit) 3,307 (3,995)
----------- -----------
Net earnings (loss) $ 4,914 $ (7,230)
=========== ===========
Earnings (loss) per common share:
Basic $ 0.09 $ (0.20)
Diluted $ 0.08 $ (0.20)
Weighted average common shares
outstanding:
Basic 54,343,077 36,009,000
Diluted 58,702,663 36,009,000
Percentage of sales:
Sales 100.0% 100.0%
Cost of sales 74.5% 76.2%
----------- -----------
Gross profit 25.5% 23.8%
SG&A expenses 20.4% 22.9%
Depreciation and amortization 1.9% 2.2%
Amortization of goodwill 0.0% 1.4%
----------- -----------
Operating earnings (loss) 3.2% -2.7%
Interest expense, net 0.2% 2.9%
----------- -----------
Earnings (loss) before income
tax expense (benefit) 3.0% -5.6%
Income tax expense (benefit) 1.2% -2.0%
----------- -----------
Net earnings (loss) 1.8% -3.6%
=========== ===========
GameStop Corp.
Balance Sheets
(in thousands of dollars, except per share data)
May 4, 2002 May 5, 2001
----------- -----------
ASSETS:
Current assets:
Cash and cash equivalents $ 113,397 $ 6,136
Receivables, net 4,924 2,929
Merchandise inventories 145,990 109,333
Prepaid expenses and other
current assets 8,092 13,603
Deferred taxes 3,418 3,533
----------- -----------
Total current assets 275,821 135,534
----------- -----------
Property and equipment:
Leasehold improvements 29,352 21,525
Fixtures and equipment 61,974 46,201
----------- -----------
91,326 67,726
Less accumulated depreciation
and amortization 38,792 18,675
----------- -----------
Net property and equipment 52,534 49,051
----------- -----------
Goodwill, net 317,957 316,636
Other noncurrent assets 1,235 536
----------- -----------
Total assets $ 647,547 $ 501,757
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT):
Current liabilities:
Accounts payable $ 94,938 $ 81,740
Accrued liabilities 47,844 30,284
----------- -----------
Total current liabilities 142,782 112,024
Payable to Barnes & Noble, Inc. 615 412,469
Deferred taxes 3,065 2,861
Other long-term liabilities 2,615 2,243
----------- -----------
Total liabilities 149,077 529,597
----------- -----------
Stockholders' equity (deficit):
Preferred stock - authorized 5,000
shares; no shares issued or
outstanding -- --
Class A common stock - $.001
par value; authorized 300,000
shares; 20,821 shares issued
and outstanding 21 --
Class B common stock - $.001
par value; authorized 100,000
shares; 36,009 shares issued
and outstanding 36 36
Additional paid-in-capital 491,283 (15,902)
Retained earnings (deficit) 7,130 (11,974)
----------- -----------
Total stockholders' equity
(deficit) 498,470 (27,840)
----------- -----------
Total liabilities and
stockholders' equity (deficit) $ 647,547 $ 501,757
=========== ===========
GameStop Corp.
Retail Sales Mix
13 weeks 13 weeks
Ended ended
May 4, 2002 May 5, 2001
----------- -----------
Video Game Hardware 19% 23%
Video Game Software 57% 47%
Video Game Accessories 12% 12%
PC Software 8% 12%
PC Accessories and Other 4% 6%
CONTACT: GameStop Corp., Grapevine
Media Contact:
Lori M. Milovich, Director, Public & Investor Relations
817/424-2130
or
Investor Contact:
David W. Carlson, Executive Vice President &
Chief Financial Officer
817/424-2130
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