GameStop Corp. EPS of $0.19 Exceeds Guidance; Comparable Store Sales Surge 12%; Video Game Software Increases 21%; GameStop Opens 95 New Stores in First Quarter
GRAPEVINE, Texas--(BUSINESS WIRE)--May 24, 2005--GameStop Corp. (NYSE:GME) (NYSE:GME.B), one of the nation's largest video game and entertainment software retailers, today reported record sales and earnings for the first quarter ended April 30, 2005.
GameStop sales increased 27.7% to $474.7 million in the first quarter of 2005, compared with $371.7 million in the prior year quarter. Video game software sales were very strong and grew by 20.7% led by such key titles as Gran Turismo 4 and God of War from Sony Computer Entertainment of America; Doom 3 from Activision, Inc.; Splinter Cell: Chaos Theory from Ubisoft Entertainment; and Tekken 5 from Namco Hometek, Inc. In addition, an extremely successful launch of Sony's PlayStation Portable (PSP) helped to fuel the strong sales volume during the quarter, as comparable store sales increased 12.0%.
Net earnings for the first quarter were $10.3 million, or $0.19 per diluted share, increasing 23% from the prior year quarter on a pro-forma basis and exceeding the high end of our previously-released guidance. Prior year quarter net earnings included an after-tax, one-time charge of $1.7 million related to a litigation settlement (see Schedule II for reconciliation of pro-forma financial data to Generally Accepted Accounting Principles).
R. Richard Fontaine, Chairman & Chief Executive Officer, commented, "The first quarter was particularly successful due mostly to strong performances in both software sales and a resurgent growth in hardware. Sony's PSP, which launched on March 24th, was a tremendous success and has been a consistent seller throughout the quarter. In addition, after a period of unanticipated inventory shortages, Sony's PlayStation 2 was in stock for most of the last month of the quarter and continues to sell very well. We are off to a great start to our fiscal year; a year in which the hardware momentum is already building from the PSP launch towards the release of Microsoft's Xbox 360 expected in the fall."
Fontaine continued, "While our gross margin for the quarter was lower than last year due to strong sales of lower-margin hardware, our selling, general and administrative expenses improved significantly, reflecting strong expense control in the management of selling expenses throughout the quarter. Our performance continues to validate our business strategy and has reinforced our confidence that the recently announced merger with Electronics Boutique Holdings Corp., when completed, will be a great strategic move and a superb investment for our shareholders."
"We are also particularly excited about the hardware announcements made during last week's Electronics Entertainment Exposition (E3) convention. In addition to Microsoft's Xbox 360, Sony announced a Spring 2006 date for their PlayStation 3, and Nintendo announced a second half of 2006 release of their new system, Revolution, and unveiled the newest version of their popular handheld system, GameBoy Micro, which they anticipate will launch in late 2005."
Guidance for Second Quarter and Full Year 2005
For the second quarter of fiscal 2005, GameStop expects comparable store sales to range from +5.0% to +7.0%, with diluted earnings per share ranging from $0.14 to $0.15. Management continues to believe that full year 2005 diluted earnings per share will range from $1.30 to $1.40, without taking into consideration the planned merger with Electronics Boutique Holdings Corp. GameStop will update guidance for the combined company after the closing of the planned merger, which is anticipated to occur in the third quarter of 2005.
Conference Call and Webcast Information
A conference call with GameStop Corp.'s management will be simulcast on the Web at (http://www.gamestop.com/investor-relations/) beginning at 11:00 AM ET on May 24, 2005, and will be accessible at (http://www.gamestop.com/investor-relations/), where it will be archived until June 7, 2005.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. (NYSE:GME (NYSE:GME.B) is one of the nation's largest video game and entertainment software retailers. The company operates 1,908 retail stores throughout the 50 states, the District of Columbia, Puerto Rico, Ireland and the United Kingdom, 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. 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 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 2005, higher than anticipated store closing or relocation costs, higher interest rates, the performance of the company's online and other initiatives, the successful completion and integration of the planned merger with Electronics Boutique Holding Corp. and other acquired businesses, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, product shortages or delays in the introduction of new generation systems and related interactive software 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, except per share data)
13 weeks 13 weeks
ended ended
April 30, 2005 May 1, 2004
-------------- ------------
Sales $474,727 $371,736
Cost of sales 347,347 266,196
-------------- ------------
Gross profit 127,380 105,540
Selling, general and administrative
expenses 100,258 86,471
Depreciation and amortization 10,265 8,299
-------------- ------------
Operating earnings 16,857 10,770
Interest expense (income), net 83 (153)
-------------- ------------
Earnings before income tax expense 16,774 10,923
Income tax expense 6,448 4,245
-------------- ------------
Net earnings $10,326 $6,678
============== ============
Net earnings per common share:
Basic $0.20 $0.12
Diluted $0.19 $0.11
Weighted average common shares
outstanding:
Basic 51,000 56,990
Diluted 54,490 60,130
Percentage of sales:
------------------------------------------
Sales 100.0% 100.0%
Cost of sales 73.2% 71.6%
-------------- ------------
Gross profit 26.8% 28.4%
SG&A expenses 21.1% 23.3%
Depreciation and amortization 2.1% 2.2%
-------------- ------------
Operating earnings 3.6% 2.9%
Interest expense (income), net 0.1% (0.0%)
-------------- ------------
Earnings before income tax expense 3.5% 2.9%
Income tax expense 1.3% 1.1%
-------------- ------------
Net earnings 2.2% 1.8%
============== ============
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
April 30, May 1,
2005 2004
--------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $149,414 $167,093
Receivables, net 10,136 6,101
Merchandise inventories 255,122 194,566
Prepaid expenses and other current assets 18,195 13,379
Prepaid taxes -- 9,310
Deferred taxes 5,435 7,661
--------- ---------
Total current assets 438,302 398,110
--------- ---------
Property and equipment:
Land 2,000 2,000
Buildings and leasehold improvements 114,794 78,727
Fixtures and equipment 197,887 138,486
--------- ---------
314,681 219,213
Less accumulated depreciation and amortization 133,983 95,819
--------- ---------
Net property and equipment 180,698 123,394
--------- ---------
Goodwill, net 320,888 320,826
Other noncurrent assets 2,268 1,277
--------- ---------
Total assets $942,156 $843,607
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $211,686 $134,084
Accrued liabilities 96,865 78,467
Note payable, current portion 12,173 --
--------- ---------
Total current liabilities 320,724 212,551
Deferred taxes 20,197 17,625
Note payable, long-term portion 24,347 --
Deferred rent and other long-term liabilities 14,451 6,818
--------- ---------
58,995 24,443
--------- ---------
Total liabilities 379,719 236,994
--------- ---------
Stockholders' equity:
Preferred stock - authorized 5,000 shares; no
shares issued or outstanding -- --
Class A common stock - $.001 par value;
authorized 300,000 shares; 24,695 and 23,469
shares issued, respectively 25 23
Class B common stock - $.001 par value;
authorized 100,000 shares; 29,902 and 36,009
shares issued
and outstanding 30 36
Additional paid-in-capital 509,969 516,676
Accumulated other comprehensive income 466 119
Retained earnings 101,947 124,765
Treasury stock, at cost, 3,263 and 2,304 shares,
respectively (50,000) (35,006)
--------- ---------
Total stockholders' equity 562,437 606,613
--------- ---------
Total liabilities and stockholders' equity $942,156 $843,607
========= =========
Schedule I
GameStop Corp.
Retail Sales Mix
13 weeks 13 weeks
ended ended
April 30, 2005 May 1, 2004
--------------------- ------------------
Video Game Hardware 20% 15%
Video Game Software 64% 65%
Video Game Accessories 11% 13%
PC Software 4% 5%
PC Accessories and Other 1% 2%
Schedule II
GameStop Corp.
Reconciliation of Litigation Settlement Charge
(in thousands, except per share data)
13 weeks Percentage
Ended Of
May 1, 2004 Sales
------------ ----------
Selling, general and administrative expenses $86,471 23.3%
Less: Litigation settlement charge 2,750 (0.7%)
------------ ----------
Selling, general and administrative expenses
excluding litigation settlement charge $83,721 22.6%
============ ==========
Operating earnings $10,770 2.9%
Add: Litigation settlement charge 2,750 0.7%
------------ ----------
Operating earnings excluding litigation
settlement charge $13,520 3.6%
============ ==========
Net earnings $6,678 1.8%
Add: After-tax litigation settlement charge 1,708 0.5%
------------ ----------
Net earnings excluding litigation settlement
charge $8,386 2.3%
============ ==========
Net earnings per common share - diluted $0.11
Add: After-tax litigation settlement charge
per common share - diluted $0.03
------------
Net earnings excluding litigation settlement
charge per common share - diluted $0.14
============
CONTACT: GameStop Corp.
Investor Contact:
David W. Carlson, 817-424-2130
Executive Vice President & Chief Financial Officer
or
Media Contact:
Brunswick Group LLC
Steven Lipin, 212-333-3810
SOURCE: GameStop Corp.