GameStop Reports Record First Quarter 2008 Results
Net Earnings Increase 151%
Total Sales Increase 42%; Comparable Store Sales Increase 27%
First Quarter EPS Beats Guidance by $0.05
Full Year EPS Guidance Raised
GRAPEVINE, Texas--(BUSINESS WIRE)--May 22, 2008--GameStop Corp. (NYSE: GME), the world's largest video game and entertainment software retailer, today reported sales and earnings for the first quarter ended May 3, 2008.
Net earnings were $62.1 million for the first quarter of 2008, as compared to net earnings of $24.7 million for the first quarter of 2007, an increase of 151.4%. Diluted earnings per share were $0.37, including debt retirement costs of $0.01 per diluted share, beating the high-end of guidance by $0.05 per share.
GameStop sales increased 41.8% to $1,813.6 million in the first quarter, in comparison to $1,279.0 million in the prior year quarter. Comparable store sales increased 27.1% during the first quarter. New video game software sales grew an amazing 72%. The top five selling games during the quarter were Take Two Interactive's GRAND THEFT AUTO IV, with only five days of sales at the end of the quarter; SUPER SMASH BROS. BRAWL and MARIO KART WII from Nintendo; RAINBOW SIX: VEGAS 2 from Ubisoft; and Electronic Arts' ARMY OF TWO.
R. Richard Fontaine, Chairman and Chief Executive Officer, indicated, "We are very bullish on the future as three major metrics are transforming the business and accelerating the potential for GameStop growth. The installed base of video game consoles grew 34% in 2007, or nearly 31 million units, the highest incremental growth in the history of the business, and we are forecasting that hardware unit sell-thru will match these levels in 2008. And behind the huge hardware growth is the fact that the demographic for videogaming is expanding dramatically as industry figures indicate that 38% of game players are female. Finally, we have an outstanding line-up of new games coming during the rest of the year, including Nintendo's WII FIT, Konami's METAL GEAR SOLID 4, Microsoft's GEARS OF WAR 2, and Activision's GUITAR HERO 4.
"GameStop's trade model continues to provide our customers with a way to lower the cost of videogaming while offering the largest selection of gaming products of any retailer in any market. We continue to attract and serve a broader consumer base as videogaming continues to attract the core gamers and is moving towards becoming mainstream family entertainment.
"With over 5,400 stores, GameStop is moving closer to our customers with more stores conveniently serving more communities. During the first quarter, GameStop opened a record 210 stores and we are well underway to achieving our goal of opening between 550 and 600 new stores in 2008. With half of the new stores opening outside of the U.S., our international store base will grow by 25% and our overall global market share will continue to increase."
Updated Guidance
For the second quarter of fiscal 2008, GameStop is forecasting comparable store sales to range from +12% to +14%. Diluted earnings per share are expected to range from $0.26 to $0.28. Based on the stronger than expected results in the first quarter of 2008, GameStop is increasing its guidance for full year diluted earnings per share to a range of $2.30 to $2.39, representing a +28% to +33% growth over last year. Comparable store sales are forecast to increase between +10% and +12% for the full fiscal year.
We continue to believe that fiscal 2009 earnings per share will grow at least 25%. This guidance is based on our analysis that the unprecedented growth of new video game hardware during 2007 and 2008, combined with strong tie ratios, significant industry investment, and a great title line-up will drive new video game software sales to double digit growth resulting in higher profitability for the company.
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 May 22, 2008 at 11:00 AM ET to discuss the first quarter sales and earnings results. The conference call will be simulcast on the Internet at http://investor.gamestop.com. The conference call will be archived on the website until June 5, 2008.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. is the world's largest video game and entertainment software retailer. The company operates 5,453 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 2, 2008 filed with the SEC and available at the SEC's Internet site at http://www.sec.gov/ or http://investor.gamestop.com.
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
13 weeks 13 weeks
ended ended
May 3, May 5,
2008 2007
---------- ----------
Sales $1,813,617 $1,278,983
Cost of sales 1,340,211 930,214
---------- ----------
Gross profit 473,406 348,769
Selling, general and administrative expenses 328,667 257,116
Depreciation and amortization 34,836 31,035
---------- ----------
Operating earnings 109,903 60,618
Interest expense, net 8,488 14,116
Debt extinguishment expense 2,331 6,724
---------- ----------
Earnings before income tax expense 99,084 39,778
Income tax expense 36,959 15,055
---------- ----------
Net earnings $ 62,125 $ 24,723
========== ==========
Earnings per common share:
Basic $0.38 $0.16
Diluted $0.37 $0.15
Weighted average common shares outstanding:
Basic 161,825 153,349
Diluted 167,377 161,256
Percentage of Sales:
----------------------------------------------
Sales 100.0% 100.0%
Cost of sales 73.9% 72.7%
---------- ----------
Gross profit 26.1% 27.3%
SG&A expenses 18.1% 20.1%
Depreciation and amortization 1.9% 2.4%
---------- ----------
Operating earnings 6.1% 4.7%
Interest expense, net 0.5% 1.1%
Debt extinguishment expense 0.1% 0.5%
---------- ----------
Earnings before income tax expense 5.5% 3.1%
Income tax expense 2.1% 1.2%
---------- ----------
Net earnings 3.4% 1.9%
========== ==========
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
May 3, May 5,
2008 2007
--------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $ 625,986 $ 307,328
Receivables, net 66,662 38,856
Merchandise inventories 988,584 793,517
Prepaid expenses and other current assets 56,603 45,721
Prepaid taxes -- 52,136
Deferred taxes 24,764 36,220
--------- ---------
Total current assets 1,762,599 1,273,778
--------- ---------
Property and equipment:
Land 12,032 11,168
Buildings & leasehold improvements 396,278 318,215
Fixtures and equipment 560,051 447,649
--------- ---------
968,361 777,032
Less accumulated depreciation and
amortization 451,472 317,276
--------- ---------
Net property and equipment 516,889 459,756
--------- ---------
Goodwill, net 1,415,509 1,403,557
Other noncurrent assets 72,788 49,687
--------- ---------
Total assets $3,767,785 $3,186,778
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 781,927 $ 597,444
Accrued liabilities 365,926 287,394
Note payable, current portion -- 12,173
Taxes payable 4,674 --
--------- ---------
Total current liabilities 1,152,527 897,011
Other long-term liabilities 79,857 70,951
Senior fixed and floating rate notes payable,
net of discount 544,992 737,374
--------- ---------
Total liabilities 1,777,376 1,705,336
--------- ---------
Stockholders' equity:
Preferred stock - authorized 5,000 shares; no
shares issued or outstanding -- --
Class A common stock - $.001 par value;
authorized 300,000 shares;
163,263 and 157,414 shares issued and
outstanding, respectively 163 157
Additional paid-in-capital 1,271,076 1,109,130
Accumulated other comprehensive income 34,837 13,515
Retained earnings 684,333 358,640
--------- ---------
Total stockholders' equity 1,990,409 1,481,442
--------- ---------
Total liabilities and stockholders' equity $3,767,785 $3,186,778
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GameStop Corp.
Schedule I
Sales Mix
13 Weeks Ended 13 Weeks Ended
May 3, 2008 May 5, 2007
------------------ ------------------
Percent Percent
Sales of Total Sales of Total
-------- --------- -------- ---------
Sales (in millions):
New video game hardware $ 339.0 18.7% $ 281.4 22.0%
New video game software 792.8 43.7% 460.6 36.0%
Used video game products 415.7 22.9% 326.4 25.5%
Other 266.1 14.7% 210.6 16.5%
-------- --------- -------- ---------
Total $ 1,813.6 100.0% $ 1,279.0 100.0%
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GameStop Corp.
Schedule II
Gross Profit Mix
13 Weeks Ended 13 Weeks Ended
May 3, 2008 May 5, 2007
------------------ ------------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
-------- --------- -------- ---------
Gross Profit (in millions):
New video game hardware $ 20.4 6.0% $ 21.6 7.7%
New video game software 156.6 19.8% 91.8 19.9%
Used video game products 204.1 49.1% 164.3 50.3%
Other 92.3 34.7% 71.1 33.8%
-------- --------
Total $ 473.4 26.1% $ 348.8 27.3%
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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.