GameStop Reports Record Third Quarter 2007 Results
Comparable Store Sales Grow 46.3%
EPS Exceeds High-End of Guidance by $0.12 per share
Operating Earnings Increase 116%
EPS, Revenue, and Comparable Store Sales Guidance Raised for
Fiscal 2007
GRAPEVINE, Texas--(BUSINESS WIRE)--Nov. 20, 2007--GameStop Corp. (NYSE:GME), the world's largest video game and entertainment software retailer, today announced record financial results for the third quarter ended November 3, 2007.
GameStop's net earnings were $52.0 million for the third quarter of 2007, including debt retirement costs of $3.8 million ($2.4 million, net of tax benefits), a 283% increase over the third quarter of 2006. Diluted earnings per share were $0.31 for the third quarter of 2007, including debt retirement costs of $0.02 per diluted share, exceeding the high-end of previously released guidance by $0.12 per share.
Total sales increased 59.3% to $1,611.2 million in comparison to $1,011.6 million in the prior year quarter. Comparable store sales increased 46.3% during the third quarter, also beating previously released guidance of 30.0% to 32.0%. During the third quarter, new video game software sales rose 59% and new video game hardware sales increased 149%. The top selling video games during the quarter were HALO 3 from Microsoft, MADDEN NFL '08 by Electronic Arts, Activision's GUITAR HERO III, BIOSHOCK by Take 2 Interactive and WII PLAY WITH REMOTE from Nintendo of America.
R. Richard Fontaine, GameStop's Chairman and Chief Executive Officer, stated, "Our third quarter sales and earnings are a reflection of not only the real momentum in the video game business as a whole, but a particularly strong statement that GameStop's model continues to run ahead of the growth curve. We had an outstanding quarter both domestically and internationally, while our e-commerce division, GameStop.com, and video game publication, Game Informer, had record quarters.
"We continue to do an excellent job of controlling our business in the face of rapid expansion in most of the 16 countries where GameStop does business. Our expenses and inventory controls have never been better planned and executed, and the scheduling of sales support for our more diverse customer base is more refined and productive than ever before.
"Our new store openings continue to generate excellent returns. During the quarter we opened 181 stores worldwide; surpassing the 5,000 store milestone, and believe that there are many more opportunities for additional store growth. Altogether, all signs point towards GameStop having a strong fourth quarter and robust 2007," concluded Fontaine.
Daniel DeMatteo, GameStop's Vice Chairman and Chief Operating Officer, noted, "We have already seen strong consumer demand for this fall's new video game software line-up. MADDEN NFL '08 and HALO 3 have sold millions of copies and are just two of the many exciting new titles that have launched this fall. As we prepare for the all important fourth quarter, our goal is to capitalize on the expanding landscape of consumers by delivering the most video gaming options."
Updated Guidance
For the fourth quarter of fiscal 2007, GameStop is forecasting comparable store sales to range from +7.0% to +9.0%, on top of comparable store sales of 26.5% in the fourth quarter of fiscal 2006 when the Nintendo Wii and Sony's Playstation 3 were launched. Diluted earnings per share are expected to range from $0.95 to $0.97 compared to earnings per share of $0.81 in the fourth quarter of 2006.
Due to the outstanding results in the third quarter and our raised expectations for the fourth quarter, we are increasing our full year 2007 diluted earnings per share guidance to range from $1.61 to $1.63. Total revenues are now projected to grow between 28.0% and 29.0%, with expected comparable store sales ranging from +20.0% to +21.0%.
Note that guidance does not include debt retirement costs.
Note that all per share data has been adjusted for the Class B share conversion and the two-for-one stock split that occurred subsequent to February 3, 2007.
Conference Call and Webcast Information
A conference call with GameStop Corp.'s management is scheduled for November 20, 2007 at 11:00 AM ET to discuss the third quarter 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 December 4, 2007.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. is the world's largest video game and entertainment software retailer. The company operates 5,123 retail stores across the United States and in fifteen international countries. 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.gamestop.com/corporate.
Safe Harbor
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, the outlook for fiscal 2007 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 13 weeks
ended ended
Nov. 3, 2007 Oct. 28, 2006
------------ -------------
Sales $ 1,611,201 $ 1,011,560
Cost of sales 1,191,637 695,904
------------ -------------
Gross profit 419,564 315,656
Selling, general and administrative
expenses 282,288 235,389
Depreciation and amortization 33,705 27,281
Stock-based compensation 6,666 5,156
Merger-related expenses -- 2,890
------------ -------------
Operating earnings 96,905 44,940
Interest expense, net 11,922 19,648
Debt extinguishment expense 3,840 3,371
------------ -------------
Earnings before income
tax expense 81,143 21,921
Income tax expense 29,186 8,352
------------ -------------
Net earnings $ 51,957 $ 13,569
============ =============
Earnings per common share:
Basic $0.32 $0.09
Diluted $0.31 $0.09
Weighted average common shares
outstanding:
Basic 160,048 150,785
Diluted 166,357 158,583
Percentage of Sales:
------------------------------------------
Sales 100.0% 100.0%
Cost of sales 74.0% 68.8%
------------ -------------
Gross profit 26.0% 31.2%
SG&A expenses 17.5% 23.3%
Depreciation and amortization 2.1% 2.7%
Stock-based compensation 0.4% 0.5%
Merger-related expenses -- 0.3%
------------ -------------
Operating earnings 6.0% 4.4%
Interest expense, net 0.8% 1.9%
Debt extinguishment expense 0.2% 0.3%
------------ -------------
Earnings before income
tax expense 5.0% 2.2%
Income tax expense 1.8% 0.9%
------------ -------------
Net earnings 3.2% 1.3%
============ =============
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
39 weeks 39 weeks
ended ended
Nov. 3, 2007 Oct. 28, 2006
-------------- -------------
Sales $ 4,228,377 $ 3,014,934
Cost of sales 3,098,745 2,097,980
-------------- -------------
Gross profit 1,129,632 916,954
Selling, general and administrative
expenses 804,193 706,110
Depreciation and amortization 96,858 79,541
Stock-based compensation 20,311 15,706
Merger-related expenses -- 6,788
-------------- -------------
Operating earnings 208,270 108,809
Interest expense, net 39,384 59,186
Debt extinguishment expense 12,591 3,562
-------------- -------------
Earnings before income
tax expense 156,295 46,061
Income tax expense 57,805 17,614
-------------- -------------
Net earnings $ 98,490 $ 28,447
============== =============
Earnings per common share:
Basic $0.63 $0.19
Diluted $0.60 $0.18
Weighted average common shares
outstanding:
Basic 157,308 149,239
Diluted 164,128 157,728
Percentage of Sales:
----------------------------------------
Sales 100.0% 100.0%
Cost of sales 73.3% 69.6%
-------------- -------------
Gross profit 26.7% 30.4%
SG&A expenses 19.0% 23.4%
Depreciation and amortization 2.3% 2.7%
Stock-based compensation 0.5% 0.5%
Merger-related expenses -- 0.2%
-------------- -------------
Operating earnings 4.9% 3.6%
Interest expense, net 0.9% 2.0%
Debt extinguishment expense 0.3% 0.1%
-------------- -------------
Earnings before income
tax expense 3.7% 1.5%
Income tax expense 1.4% 0.6%
-------------- -------------
Net earnings 2.3% 0.9%
============== =============
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
Nov. 3, Oct. 28,
2007 2006
--------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $ 277,808 $ 180,948
Receivables, net 47,443 32,841
Merchandise inventories 1,164,229 844,979
Prepaid expenses and other current assets 59,615 33,346
Prepaid taxes 73,257 68,307
Deferred taxes 38,458 48,391
--------- ---------
Total current assets 1,660,810 1,208,812
--------- ---------
Property and equipment:
Land 12,026 10,106
Buildings & leasehold improvements 358,445 291,692
Fixtures and equipment 516,767 394,712
--------- ---------
887,238 696,510
Less accumulated depreciation and amortization 386,658 257,981
--------- ---------
Net property and equipment 500,580 438,529
--------- ---------
Goodwill, net 1,402,845 1,395,824
Other noncurrent assets 50,605 43,605
--------- ---------
Total assets $3,614,840 $3,086,770
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 977,830 $ 605,773
Accrued liabilities 313,844 308,192
Note payable, current portion -- 12,173
--------- ---------
Total current liabilities 1,291,674 926,138
Deferred taxes -- 11,300
Other long-term liabilities 78,692 39,168
Senior floating and fixed rate notes payable, net
of discount 574,229 876,592
--------- ---------
Total liabilities 1,944,595 1,853,198
--------- ---------
Stockholders' equity:
Preferred stock - authorized 5,000 shares; no
shares issued or outstanding -- --
Class A common stock - $.001 par value;
authorized 300,000 shares;
160,959 and 151,620 shares issued and
outstanding, respectively 161 152
Additional paid-in-capital 1,200,586 1,006,794
Accumulated other comprehensive income 37,091 5,833
Retained earnings 432,407 220,793
--------- ---------
Total stockholders' equity 1,670,245 1,233,572
--------- ---------
Total liabilities and stockholders'
equity $3,614,840 $3,086,770
========= =========
Schedule I
GameStop Corp.
Sales Mix
13 Weeks Ended 13 Weeks Ended
Nov. 3, 2007 Oct. 28, 2006
--------------- ---------------
Percent Percent
of of
Sales Total Sales Total
------- ------- ------- -------
Sales (in millions):
New video game hardware $ 373.9 23.2% $ 150.5 14.9%
New video game software 636.9 39.5% 401.8 39.7%
Used video game products 356.3 22.1% 295.4 29.2%
Other 244.1 15.2% 163.9 16.2%
------- ------- ------- -------
Total $1,611.2 100.0% $1,011.6 100.0%
======= ======= ======= =======
======================================================================
Schedule II
GameStop Corp.
Gross Profit Mix
13 Weeks Ended 13 Weeks Ended
Nov. 3, 2007 Oct. 28, 2006
--------------- ---------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
------- ------- ------- -------
Gross Profit (in millions):
New video game hardware $ 27.5 7.4% $ 16.5 11.0%
New video game software 132.1 20.7% 94.0 23.4%
Used video game products 172.6 48.5% 143.9 48.7%
Other 87.4 35.8% 61.3 37.4%
------- -------
Total $ 419.6 26.0% $ 315.7 31.2%
======= =======
CONTACT: Media Contact:
Chris Olivera
Divisional Vice President,
Corporate Communications
GameStop Corp.
(817) 424-2130
or
Investor Contact:
David W. Carlson
Executive Vice President &
Chief Financial Officer
GameStop Corp.
(817) 424-2130
SOURCE: GameStop Corp.