GameStop Corp. Reports Record Earnings for 2003; Fourth Quarter EPS Grows 29%; 300 - 330 New Stores Projected for 2004
GRAPEVINE, Texas--(BUSINESS WIRE)--March 17, 2004--GameStop Corp. (NYSE:GME), the nation's largest video game and entertainment software specialty retailer, today reported record earnings for the fourth quarter and for the full year ended January 31, 2004.
GameStop reported record earnings of $63.5 million during the fiscal year ended January 31, 2004, or $1.06 per diluted share, an increase of 21.8%, as compared to $52.4 million, or $0.87 per diluted share, in the prior fiscal year. For the fourth quarter of fiscal 2003, earnings were $39.6 million, or $0.67 per diluted share, an increase of 28.8%, as compared to $31.6 million, or $0.52 per diluted share, in the prior year quarter.
Operating margins on a pro-forma basis, after considering the effects of implementing EITF 02-16 (see Schedules I and II), rose 40 basis points in the fourth quarter, to 10.5%, and full-year operating margins improved 50 basis points to 6.9%. Operating margin improvements were primarily achieved through gross margin expansion, as GameStop continued to refine its promotional marketing, and improve in-store merchandising to generate a more favorable merchandise mix. In addition, fourth quarter productivity of new stores exceeded the company's expectations.
GameStop finished fiscal 2003 with a strong balance sheet, including a cash balance of $205 million, and no debt outstanding. GameStop's business model has proven to generate a superior return on investment with significant free-cash flow and nominal per-store cash requirements.
"We set very aggressive growth and productivity goals for GameStop in 2003," said R. Richard Fontaine, Chairman and CEO. "I am pleased that virtually all areas of our business were improved throughout the year. We started the year with a goal of making the GameStop model more productive, and we have successfully done so. Our in-store merchandising presentation was more effective, our distribution became more efficient, and our store systems became more responsive to the changing needs of the business. In addition, our new and used business combination was further refined during the year, our stores are almost entirely rebranded, and our market-by-market real estate assessments were more thorough and successful than ever. As such, we are very confident in the outlook for 2004, and plan to add another 300 to 330 new stores throughout the United States and Europe."
Guidance for the first quarter and full year 2004 remain unchanged. For the first quarter of fiscal 2004, the company continues to expect comparable store sales to range from flat to +2%, while diluted earnings per share are expected to range from $0.13 to $0.14. For the fiscal year ending January 29, 2005, diluted earnings per share are expected to range from $1.20 to $1.24.
During the first quarter of fiscal 2003, GameStop implemented FASB Emerging Issues Task Force Issue 02-16 (EITF 02-16), which deals with the accounting for vendor rebates, advertising allowances, and other cash consideration received from vendors. The implementation of EITF 02-16 reduced fiscal 2003 net earnings by $0.05 per diluted share due to the deferral of vendor allowances reported as a reduction in merchandise inventories. In Schedules I and II, we have presented both this year's and last year's fourth quarter and year to date results on a pro forma basis as if EITF 02-16 had been implemented prior to the beginning of fiscal 2002.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. (NYSE:GME) is the nation's largest video game and entertainment software specialty retailer, based on the number of U.S. stores and U.S. revenues. The company operates 1,514 retail stores throughout 49 states, the District of Columbia, Puerto Rico and Ireland, 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, 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.
Barnes and Noble, Inc. (NYSE:BKS), the world's largest bookseller, has approximately a 65 percent interest in GameStop. 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, 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. In addition, the video game industry has historically been cyclical in nature and dependent upon the introduction of new generation systems and related interactive software. 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
January 31, 2004 February 1, 2003
------------------ ----------------
Sales $ 625,381 $ 520,396
Cost of sales 461,705 393,477
------------------ ----------------
Gross profit 163,676 126,919
Selling, general and
administrative expenses 90,581 68,459
Depreciation and amortization 8,140 5,948
------------------ ----------------
Operating earnings 64,955 52,512
Interest expense (income), net (156) (375)
------------------ ----------------
Earnings before income tax expense 65,111 52,887
Income tax expense 25,554 21,300
------------------ ----------------
Net earnings $ 39,557 $ 31,587
================== ================
Earnings per common share:
Basic $ 0.71 $ 0.55
Diluted $ 0.67 $ 0.52
Weighted average common shares
outstanding:
Basic 55,705 57,040
Diluted 59,195 60,561
Percentage of sales:
--------------------------------
Sales 100.0% 100.0%
Cost of sales 73.8% 75.6%
--------------- ----------------
Gross profit 26.2% 24.4%
SG&A expenses 14.5% 13.2%
Depreciation and amortization 1.3% 1.1%
--------------- ----------------
Operating earnings 10.4% 10.1%
Interest expense (income), net - (0.1)%
--------------- ----------------
Earnings before income tax expense 10.4% 10.2%
Income tax expense 4.1% 4.1%
--------------- ----------------
Net earnings 6.3% 6.1%
=============== ================
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
52 weeks 52 weeks
ended ended
January 31, 2004 February 1, 2003
----------------- ------------------
Sales $ 1,578,838 $ 1,352,791
Cost of sales 1,142,264 1,009,491
----------------- ------------------
Gross profit 436,574 343,300
Selling, general and
administrative expenses 303,243 233,676
Depreciation and amortization 28,947 22,553
----------------- ------------------
Operating earnings 104,384 87,071
Interest expense (income), net (804) (630)
----------------- ------------------
Earnings before income tax
expense 105,188 87,701
Income tax expense 41,721 35,297
----------------- ------------------
Net earnings $ 63,467 $ 52,404
================= ==================
Earnings per common share:
Basic $ 1.13 $ 0.93
Diluted $ 1.06 $ 0.87
Weighted average common
shares outstanding:
Basic 56,330 56,289
Diluted 59,764 60,419
Percentage of sales:
--------------------------------
Sales 100.0% 100.0%
Cost of sales 72.4% 74.6%
------------- ----------------
Gross profit 27.6% 25.4%
SG&A expenses 19.2% 17.3%
Depreciation and amortization 1.8% 1.7%
------------- ----------------
Operating earnings 6.6% 6.4%
Interest expense (income), net - (0.1)%
------------- ----------------
Earnings before income tax expense 6.6% 6.5%
Income tax expense 2.6% 2.6%
------------- ----------------
Net earnings 4.0% 3.9%
============= ================
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
January 31, February 1,
2004 2003
----------------- ---------------
ASSETS:
Current assets:
Cash and cash equivalents $ 204,905 $ 232,030
Receivables, net 9,545 6,893
Merchandise inventories 223,526 161,369
Prepaid expenses and other
current assets 14,340 10,127
Prepaid taxes 12,775 -
Deferred taxes 7,661 6,034
---------------- ---------------
Total current assets 472,752 416,453
---------------- ---------------
Property and equipment:
Leasehold improvements 57,259 39,927
Fixtures and equipment 131,556 84,726
---------------- ---------------
188,815 124,653
Less accumulated depreciation
and amortization 84,784 56,259
---------------- ---------------
Net property and equipment 104,031 68,394
---------------- ---------------
Goodwill, net 320,826 317,957
Other noncurrent assets 1,315 1,105
---------------- ---------------
Total assets $ 898,924 $ 803,909
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 204,011 $ 160,378
Accrued liabilities 79,839 65,779
Accrued income taxes payable - 15,814
---------------- ---------------
Total current liabilities 283,850 241,971
Deferred taxes 17,731 10,391
Other long-term liabilities 3,310 2,872
---------------- ---------------
Total liabilities 304,891 255,234
---------------- ---------------
Stockholders' equity:
Preferred stock - authorized
5,000 shares; no shares
issued or outstanding - -
Class A common stock - $.001
par value; authorized
300,000 shares; 22,993 and
21,050 shares issued and
outstanding, respectively 23 21
Class B common stock - $.001
par value; authorized
100,000 shares; 36,009 shares
issued and outstanding 36 36
Additional paid-in-capital 510,597 493,998
Accumulated other
comprehensive income 296 -
Retained earnings 118,087 54,620
Treasury stock, at cost, 2,304
and 0 shares, respectively (35,006) -
---------------- ---------------
Total stockholders' equity 594,033 $ 548,675
---------------- ---------------
Total liabilities and
stockholders' equity $ 898,924 $ 803,909
================ ===============
Schedule I
GameStop Corp.
Pro-Forma Statement of Operations
(in thousands, except per share data)
13 weeks 13 weeks
ended ended
January 31, 2004 February 1, 2003
----------------- ------------------
Sales $ 625,381 $ 520,396
Cost of sales (1) 460,738 387,191
----------------- ------------------
Gross profit 164,643 133,205
Selling, general and
administrative expenses (1) 90,582 74,821
Depreciation and amortization 8,140 5,948
----------------- ------------------
Operating earnings 65,921 52,436
Interest expense (income), net (156) (375)
----------------- ------------------
Earnings before income tax
expense 66,077 52,811
Income tax expense 25,910 21,269
----------------- ------------------
Net earnings $ 40,167 $ 31,542
================= ==================
Net earnings per common share:
Basic $ 0.72 $ 0.55
Diluted $ 0.68 $ 0.52
Weighted average common shares
outstanding:
Basic 55,705 57,040
Diluted 59,195 60,561
Percentage of sales:
----------------------------
Sales 100.0% 100.0%
Cost of sales 73.7% 74.4%
----------------- ------------------
Gross profit 26.3% 25.6%
SG&A expenses 14.5% 14.4%
Depreciation and amortization 1.3% 1.1%
----------------- ------------------
Operating earnings 10.5% 10.1%
Interest expense (income), net - (0.1)%
----------------- ------------------
Earnings before income tax
expense 10.5% 10.2%
Income tax expense 4.1% 4.1%
----------------- ------------------
Net earnings 6.4% 6.1%
================= ==================
Footnote to Schedule I:
(1) If GameStop had implemented EITF 02-16 prior to the beginning of
fiscal 2002, vendor allowances in excess of reimbursement for
specific, incremental, identifiable costs would have equated to
$6,362 for the 13 weeks ended February 1, 2003. GameStop would
have recognized vendor allowances as a reduction in cost of sales
aggregating $967 during the 13 weeks ended January 31, 2004.
GameStop would have deferred vendor allowances aggregating $76 as
a reduction in merchandise inventories during the 13 weeks ended
February 1, 2003.
Schedule II
GameStop Corp.
Pro-Forma Statement of Operations
(in thousands, except per share data)
52 weeks 52 weeks
ended ended
January 31, 2004 February 1, 2003
-------------------- ----------------
Sales $ 1,578,838 $ 1,352,791
Cost of sales (1) 1,138,596 984,530
-------------------- ----------------
Gross profit 440,242 368,261
Selling, general and
administrative expenses (1) 303,243 258,972
Depreciation and amortization 28,947 22,553
-------------------- ----------------
Operating earnings 108,052 86,736
Interest expense (income), net (804) (630)
-------------------- ----------------
Earnings before income tax expense 108,856 87,366
Income tax expense 43,108 35,160
-------------------- ----------------
Net earnings $ 65,748 $ 52,206
==================== ================
Net earnings per common share:
Basic $ 1.17 $ 0.93
Diluted $ 1.10 $ 0.86
Weighted average common shares
outstanding:
Basic 56,330 56,289
Diluted 59,764 60,419
Percentage of sales:
-------------------------------
Sales 100.0% 100.0%
Cost of sales 72.1% 72.8%
-------------------- ----------------
Gross profit 27.9% 27.2%
SG&A expenses 19.2% 19.1%
Depreciation and amortization 1.8% 1.7%
-------------------- ----------------
Operating earnings 6.9% 6.4%
Interest expense (income), net - (0.1%)
-------------------- ----------------
Earnings before income tax expense 6.9% 6.5%
Income tax expense 2.7% 2.6%
-------------------- ----------------
Net earnings 4.2% 3.9%
==================== ================
Footnote to Schedule II:
(1) If GameStop had implemented EITF 02-16 prior to the beginning of
fiscal 2002, vendor allowances in excess of reimbursement for
specific, incremental, identifiable costs would have equated to
$25,296 for the 52 weeks ended February 1, 2003. GameStop would
have recognized vendor allowances as a reduction in cost of sales
aggregating $3,668 during the 52 weeks ended January 31, 2004.
GameStop would have deferred vendor allowances aggregating $335 as
a reduction in merchandise inventories during the 52 weeks ended
February 1, 2003.
CONTACT: GameStop Corp., Grapevine
Media Contact
Lori M. Milovich, 817-424-2130
Director, Public & Investor Relations
or
GameStop Corp.
Investor Contact
David W. Carlson, 817-424-2130
Executive Vice President & Chief Financial Officer
SOURCE: GameStop Corp.