GameStop Reports Record 2007 Sales and Earnings
2007 Sales and Net Earnings Grow 33% and 82%, respectively
Comparable Store Sales Increase 17.4% for Q4 and 24.7% for the
Year
575 to 600 New Stores to be Opened Worldwide in 2008
Strong Growth Planned for 2008 and Long Range Earnings Target
Reiterated
GRAPEVINE, Texas--(BUSINESS WIRE)--March 18, 2008--GameStop Corp. (NYSE: GME), the world's largest video game and entertainment software retailer, today reported sales and earnings for the fourth quarter and the fiscal year ended February 2, 2008. The company also issued guidance for fiscal 2008 and an outlook for the year to follow.
GameStop has become the world's fastest growing retailer in the Fortune 500 by several metrics: sales of $7.1 billion for fiscal 2007, an increase of 33% over fiscal 2006; a 24.7% increase in comparable store sales; the opening of 586 new stores; and a 50% increase in operating earnings. Moreover, growth prospects remain favorable for continued rapid expansion in markets in various stages of development throughout the world.
The company continues to develop and identify additional growth opportunities in the more developed video game markets of the US, Canada and Australia, as well as building new stores in virtually all of the more immature markets across Europe. In 2007, GameStop opened 586 new stores worldwide. Operating cash flow funded all of the new openings and also provided a year end cash balance of $857 million.
Fourth Quarter Financial Results
Net earnings were $189.8 million for the 13-week fourth quarter of 2007, as compared to net earnings of $129.8 million for the 14-week fourth quarter of 2006, an increase of 46.2%. Diluted earnings per share were $1.14, compared to $0.81 per diluted share in the prior year quarter.
GameStop sales increased 24.4% to $2,865.6 million in the fourth quarter, in comparison to $2,304.0 million in the prior year quarter. On a comparable store basis, sales increased 17.4% during the fourth quarter. New video game software sales grew 38.4%. The top five selling games during the quarter were Activision's CALL OF DUTY 4: MODERN WARFARE, ROCK BAND from Electronic Arts, ASSASSIN'S CREED by Ubisoft, Nintendo's SUPER MARIO GALAXY, and Activision's GUITAR HERO III.
Full Year Financial Results
Net earnings were $288.3 million for the 52-week fiscal year 2007, including debt retirement costs of $12.6 million ($7.9 million, net of tax benefits), as compared to earnings of $158.3 million for the 53-week fiscal year 2006, an increase of 82.1%. Diluted earnings per share were $1.75 for fiscal 2007, including debt retirement costs of $0.05 per diluted share, as compared to $1.00 per diluted share in fiscal 2006.
R. Richard Fontaine, Chairman and Chief Executive Officer, indicated, "Our performance in 2007 was impressive from many perspectives. But what is particularly noteworthy is that 2007 was a transformative year with hardware sales setting records and the installed base of users reaching an all-time high. Likewise, the expanding demographic profile of the video game player has moved this business into the mainstream of entertainment. This will be compounded by a strong 2008 video game title lineup and the value aspect of GameStop's used model that appeals to a broad base of budget conscious consumers.
"Prospects for the 575-600 new store openings in 2008 look very promising even with the current concerns about the US economy. As one of the few American retailers actively seeking many new sites, GameStop is positioned to secure better locations with more advantageous lease terms and is more frequently being viewed as a critical brand to anchor strip centers," concluded Fontaine.
Business Outlook
For fiscal 2008 (the 52-week year ending January 31, 2009), sales are projected to grow between 19.0% and 21.0%, with comparable store sales ranging from +10.0% to +12.0%, driven by a strong lineup of video game title releases across all platforms. Diluted earnings per share for the full year are expected to range from $2.25 to $2.34, an increase of between 25% and 30% over fiscal 2007. GameStop expects to open between 575 and 600 stores worldwide in fiscal 2008.
For the first quarter of fiscal 2008, the company expects comparable store sales to range from +24.0% to +25.0%, led by continued demand for all console and handheld systems as well as a strong slate of new video game releases, such as Nintendo's SUPER SMASH BROS. BRAWL for the Wii, Capcom's DEVIL MAY CRY 4 and GRAND THEFT AUTO IV from Take Two Interactive. Diluted earnings per share are expected to range from $0.32 to $0.33. This compares to earnings per share of $0.15 in the first quarter of 2007.
Looking beyond 2008, GameStop currently expects earnings per share to grow at least 25% in fiscal 2009 (the year ending January 2010) based on several key factors, including: the company's growing worldwide retail footprint, the company's ongoing cash generation, the continued expansion of the video game industry, and the broadening consumer base.
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 March 18, 2008 at 11:00 AM ET to discuss the fourth quarter and full year 2007 sales and earnings results. The conference call will be simulcast on the Internet at (http://www.gamestop.com/investor-relations/). The conference call will be archived on the website until April 9, 2008.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. is the world's largest video game and entertainment software retailer. The company operates 5,264 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 3, 2007 filed with the SEC and available at the SEC's Internet site at http://www.sec.gov.
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
13 weeks 14 weeks
ended ended
Feb. 2, 2008 Feb. 3, 2007
------------ ------------
Sales $ 2,865,585 $ 2,303,966
Cost of sales 2,181,510 1,749,478
------------ ------------
Gross profit 684,075 554,488
Selling, general and administrative
expenses 350,912 294,025
Depreciation and amortization 33,412 30,321
Stock-based compensation 6,600 5,272
------------ ------------
Operating earnings 293,151 224,870
Interest expense, net 8,390 14,138
Debt extinguishment expense -- 2,497
------------ ------------
Earnings before income tax expense 284,761 208,235
Income tax expense 94,960 78,432
------------ ------------
Net earnings $ 189,801 $ 129,803
============ ============
Earnings per common share:
Basic $ 1.18 $ 0.85
Diluted $ 1.14 $ 0.81
Weighted average common shares
outstanding:
Basic 160,980 151,832
Diluted 166,992 159,832
Percentage of Sales:
-----------------------------------------
Sales 100.0% 100.0%
Cost of sales 76.1% 75.9%
------------ ------------
Gross profit 23.9% 24.1%
SG&A expenses 12.3% 12.8%
Depreciation and amortization 1.2% 1.3%
Stock-based compensation 0.2% 0.2%
------------ ------------
Operating earnings 10.2% 9.8%
Interest expense, net 0.3% 0.7%
Debt extinguishment expense -- 0.1%
------------ ------------
Earnings before income tax expense 9.9% 9.0%
Income tax expense 3.3% 3.4%
------------ ------------
Net earnings 6.6% 5.6%
============ ============
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
52 weeks 53 weeks
ended ended
Feb. 2, 2008 Feb. 3, 2007
------------ ------------
Sales $ 7,093,962 $ 5,318,900
Cost of sales 5,280,255 3,847,458
------------ ------------
Gross profit 1,813,707 1,471,442
Selling, general and administrative
expenses 1,155,105 1,000,135
Depreciation and amortization 130,270 109,862
Stock-based compensation 26,911 20,978
Merger-related expenses -- 6,788
------------ ------------
Operating earnings 501,421 333,679
Interest expense, net 47,774 73,324
Debt extinguishment expense 12,591 6,059
------------ ------------
Earnings before income tax expense 441,056 254,296
Income tax expense 152,765 96,046
------------ ------------
Net earnings $ 288,291 $ 158,250
============ ============
Earnings per common share:
Basic $ 1.82 $ 1.06
Diluted $ 1.75 $ 1.00
Weighted average common shares
outstanding:
Basic 158,226 149,924
Diluted 164,844 158,284
Percentage of Sales:
-----------------------------------------
Sales 100.0% 100.0%
Cost of sales 74.4% 72.3%
------------ ------------
Gross profit 25.6% 27.7%
SG&A expenses 16.3% 18.8%
Depreciation and amortization 1.8% 2.1%
Stock-based compensation 0.4% 0.4%
Merger-related expenses -- 0.1%
------------ ------------
Operating earnings 7.1% 6.3%
Interest expense, net 0.7% 1.4%
Debt extinguishment expense 0.2% 0.1%
------------ ------------
Earnings before income tax expense 6.2% 4.8%
Income tax expense 2.1% 1.8%
------------ ------------
Net earnings 4.1% 3.0%
============ ============
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
Feb. 2, Feb. 3,
2008 2007
--------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $ 857,414 $ 652,403
Receivables, net 56,019 34,268
Merchandise inventories 801,025 675,385
Prepaid expenses and other current
assets 52,778 37,882
Prepaid taxes -- 5,545
Deferred taxes 27,481 34,858
--------- ---------
Total current assets 1,794,717 1,440,341
--------- ---------
Property and equipment:
Land 11,870 10,712
Buildings & leasehold improvements 378,611 305,806
Fixtures and equipment 538,738 425,841
--------- ---------
929,219 742,359
Less accumulated depreciation and
amortization 417,550 285,896
--------- ---------
Net property and equipment 511,669 456,463
--------- ---------
Goodwill, net 1,402,440 1,403,907
Other noncurrent assets 67,065 48,873
--------- ---------
Total assets $3,775,891 $3,349,584
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 844,376 $ 717,868
Accrued liabilities 409,878 357,016
Note payable, current portion -- 12,173
Taxes payable 6,303 --
--------- ---------
Total current liabilities 1,260,557 1,087,057
Other long-term liabilities 78,415 43,338
Senior fixed and floating rate notes payable,
net of discount 574,473 843,311
--------- ---------
Total liabilities 1,913,445 1,973,706
--------- ---------
Stockholders' equity:
Preferred stock - authorized 5,000
shares; no shares
issued or outstanding -- --
Class A common stock - $.001 par
value; authorized 300,000 shares;
161,007 and 152,305 shares
issued and outstanding,
respectively 161 152
Additional paid-in-capital 1,208,474 1,021,903
Accumulated other comprehensive
income 31,603 3,227
Retained earnings 622,208 350,596
--------- ---------
Total stockholders' equity 1,862,446 1,375,878
--------- ---------
Total liabilities and
stockholders' equity $3,775,891 $3,349,584
========= =========
Schedule I
GameStop Corp.
Sales Mix
13 Weeks Ended 14 Weeks Ended
Feb. 2, 2008 Feb. 3, 2007
---------------- ----------------
Percent Percent
Sales of Sales of
Total Total
------- ------- ------- -------
Sales (in millions):
New video game hardware $ 719.8 25.1% $ 604.9 26.3%
New video game software 1,209.0 42.2% 873.7 37.9%
Used video game products 546.7 19.1% 436.5 18.9%
Other 390.1 13.6% 388.9 16.9%
------- ------- ------- -------
Total $2,865.6 100.0% $2,304.0 100.0%
======= ======= ======= =======
52 Weeks Ended 53 Weeks Ended
Feb. 2, 2008 Feb. 3, 2007
---------------- ----------------
Percent Percent
Sales of Sales of
Total Total
------- ------- ------- -------
Sales (in millions):
New video game hardware $1,668.9 23.5% $1,073.7 20.2%
New video game software 2,800.7 39.5% 2,012.5 37.8%
Used video game products 1,586.7 22.4% 1,316.0 24.8%
Other 1,037.7 14.6% 916.7 17.2%
------- ------- ------- -------
Total $7,094.0 100.0% $5,318.9 100.0%
======= ======= ======= =======
=================================================== =================
Schedule II
GameStop Corp.
Gross Profit Mix
13 Weeks Ended 14 Weeks Ended
Feb. 2, 2008 Feb. 3, 2007
---------------- ----------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
------- ------- ------- -------
Gross Profit (in millions):
New video game hardware $ 37.6 5.2% $ 33.5 5.5%
New video game software 257.6 21.3% 178.7 20.5%
Used video game products 262.2 48.0% 213.0 48.8%
Other 126.7 32.5% 129.3 33.2%
------- -------
Total $ 684.1 23.9% $ 554.5 24.1%
======= =======
52 Weeks Ended 53 Weeks Ended
Feb. 2, 2008 Feb. 3, 2007
---------------- ----------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
------- ------- ------- -------
Gross Profit (in millions):
New video game hardware $ 108.2 6.5% $ 77.0 7.2%
New video game software 581.7 20.8% 427.3 21.2%
Used video game products 772.2 48.7% 651.9 49.5%
Other 351.6 33.9% 315.2 34.4%
------- -------
Total $1,813.7 25.6% $1,471.4 27.7%
======= =======
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.