GameStop Expects to Grow 2009 Earnings in Spite of Industry Weakness
Call of Duty: Modern Warfare 2 is Biggest Launch in GameStop History
GRAPEVINE, Texas--(BUSINESS WIRE)--Nov. 19, 2009--
GameStop Corp. (NYSE: GME), the world’s largest video game and
entertainment software retailer, today reported sales and earnings
results for the third quarter ended October 31, 2009.
Total company sales in the quarter were $1.83 billion, an 8.2% increase
as compared to sales of $1.70 billion in the prior year quarter. New
software sales grew 9.4%, advancing our new video game market share by
150 basis points over last year. Used product sales increased 19.4%, on
top of the 19.3% increase in the third quarter of 2008. Comparable store
sales decreased 7.8%, attributable primarily to a decline in new video
game hardware sales.
The top five selling games during the quarter were Electronic Arts’ Madden
NFL 10, Microsoft’s Halo 3: ODST, Warner Home Video Games’ Batman:
Arkham Asylum, 2K Sports’ NBA 2K10 and Nintendo’s Wii
Sports Resort. Each of these new games was well received by
consumers and met or exceeded our initial sales expectations.
Net earnings for the quarter were $52.2 million, including $2.5 million
of debt retirement costs ($1.6 million net of tax benefits). This
represents an 11.8% increase as compared to net earnings of $46.7
million in the prior year period, including merger-related costs of
$16.6 million ($10.5 million net of tax benefits). Diluted earnings per
share were $0.31, including $0.01 of debt retirement cost, compared to
$0.28 in the prior year quarter, including merger-related costs of $0.06
per diluted share.
Daniel DeMatteo, GameStop Chief Executive Officer, stated, “A sharp
focus on efficient operations in this challenging global economy
delivered solid earnings results and significant market share gains.
Gross margins expanded, led by a sequential 150 basis point improvement
in the used category. Store foot traffic increased from the prior
quarter, driven by strong new title releases and price cuts on all
current generation platforms.
“The holiday season has started strong. In the first 72 hours of its
release, GameStop sold over 2.5 million copies worldwide of Call of
Duty: Modern Warfare 2. We are optimistic that the huge success of
this game will serve as a bellwether for what we can expect for the
remainder of our holiday game sales.
“We know consumers are looking for value in these difficult economic
times. Our stores are prepared to deliver this holiday with the broadest
selection of new and used games, the most knowledgeable gaming
associates and the buy-sell-trade model, which offers affordable choices
that meet the needs of all types of gaming customers.”
Updated Guidance
Based on strong initial results of the new software titles released
earlier this month, such as Call of Duty: Modern Warfare 2 from
Activision, New Super Mario Bros. from Nintendo and Ubisoft’s Assassin’s
Creed 2, we expect a solid fourth quarter in sales and earnings.
For the fourth quarter of fiscal 2009, GameStop is reaffirming guidance
of diluted earnings per share to range from $1.47 to $1.65, as compared
to $1.39 in the prior year period. Comparable store sales are projected
to range from -7.0% to -1.0%.
Full year diluted earnings per share are forecast to range from $2.45 to
$2.63, representing annual EPS growth of +2% to +10%. Comparable store
sales are projected to range from -7.0% to -4.0% for the full year.
Note that guidance does not include debt retirement costs or
merger-related expenses.
Conference Call and Webcast Information
A conference call with GameStop Corp.’s management is scheduled for
November 19, 2009 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://investor.gamestop.com.
The conference call will be archived on the website until December 3,
2009.
About GameStop
Headquartered in Grapevine, TX, GameStop Corp., a Fortune 500 and S&P
500 company, is the world's largest video game and entertainment
software retailer. The company operates 6,391 retail stores in 17
countries worldwide. The company also operates an e-commerce site,
GameStop.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 the
fourth quarter and fiscal year 2009, future financial and operating
results, 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.
GameStop undertakes no obligation to publicly update or revise any
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; the timing of release of
video game titles for next generation consoles; the risks associated
with expanded international operations and the integration of recent
acquisitions, including Micromania; the impact of increased competition
and changing technology in the video game industry; 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 January
31, 2009, 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
|
|
|
|
Oct. 31, 2009
|
|
Nov. 1, 2008
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,834,727
|
|
|
$
|
1,695,746
|
|
|
Cost of sales
|
|
|
1,311,643
|
|
|
|
1,222,317
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
523,084
|
|
|
|
473,429
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
|
expenses
|
|
|
391,210
|
|
|
|
335,722
|
|
|
Depreciation and amortization
|
|
|
41,605
|
|
|
|
35,767
|
|
|
Merger-related expenses
|
|
|
0
|
|
|
|
16,605
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
90,269
|
|
|
|
85,335
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
10,466
|
|
|
|
8,807
|
|
|
Debt extinguishment expense
|
|
|
2,461
|
|
|
|
0
|
|
|
|
|
|
|
|
|
Earnings before income
|
|
|
|
|
|
tax expense
|
|
|
77,342
|
|
|
|
76,528
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
25,117
|
|
|
|
29,859
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
52,225
|
|
|
$
|
46,669
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
Basic
|
|
$
|
0.32
|
|
|
$
|
0.29
|
|
|
Diluted
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
outstanding:
|
|
|
|
|
|
Basic
|
|
|
164,702
|
|
|
|
163,736
|
|
|
Diluted
|
|
|
168,113
|
|
|
|
167,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Sales:
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
Cost of sales
|
|
|
71.5
|
%
|
|
|
72.1
|
%
|
|
|
|
|
|
|
|
Gross profit
|
|
|
28.5
|
%
|
|
|
27.9
|
%
|
|
|
|
|
|
|
|
SG&A expenses
|
|
|
21.3
|
%
|
|
|
19.8
|
%
|
|
Depreciation and amortization
|
|
|
2.3
|
%
|
|
|
2.1
|
%
|
|
Merger-related expenses
|
|
|
0.0
|
%
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
4.9
|
%
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
0.6
|
%
|
|
|
0.5
|
%
|
|
Debt extinguishment expense
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
Earnings before income
|
|
|
|
|
|
tax expense
|
|
|
4.2
|
%
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
1.4
|
%
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
Net earnings
|
|
|
2.8
|
%
|
|
|
2.8
|
%
|
|
|
|
GameStop Corp.
|
|
Statements of Operations
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
39 weeks
|
|
39 weeks
|
|
|
|
ended
|
|
ended
|
|
|
|
Oct. 31, 2009
|
|
Nov. 1, 2008
|
|
|
|
|
|
|
|
Sales
|
|
$
|
5,553,984
|
|
|
$
|
5,313,783
|
|
|
Cost of sales
|
|
|
3,993,381
|
|
|
|
3,882,825
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,560,603
|
|
|
|
1,430,958
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
|
expenses
|
|
|
1,151,815
|
|
|
|
1,012,134
|
|
|
Depreciation and amortization
|
|
|
119,109
|
|
|
|
106,912
|
|
|
Merger-related expenses
|
|
|
0
|
|
|
|
16,605
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
289,679
|
|
|
|
295,307
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
33,422
|
|
|
|
26,506
|
|
|
Debt extinguishment expense
|
|
|
5,323
|
|
|
|
2,331
|
|
|
|
|
|
|
|
|
Earnings before income
|
|
|
|
|
|
tax expense
|
|
|
250,934
|
|
|
|
266,470
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
89,591
|
|
|
|
100,513
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
161,343
|
|
|
$
|
165,957
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
Basic
|
|
$
|
0.98
|
|
|
$
|
1.02
|
|
|
Diluted
|
|
$
|
0.96
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
outstanding:
|
|
|
|
|
|
Basic
|
|
|
164,604
|
|
|
|
162,983
|
|
|
Diluted
|
|
|
167,981
|
|
|
|
167,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Sales:
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
Cost of sales
|
|
|
71.9
|
%
|
|
|
73.1
|
%
|
|
|
|
|
|
|
|
Gross profit
|
|
|
28.1
|
%
|
|
|
26.9
|
%
|
|
|
|
|
|
|
|
SG&A expenses
|
|
|
20.7
|
%
|
|
|
19.0
|
%
|
|
Depreciation and amortization
|
|
|
2.2
|
%
|
|
|
2.0
|
%
|
|
Meger-related expenses
|
|
|
0.0
|
%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
5.2
|
%
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
0.6
|
%
|
|
|
0.5
|
%
|
|
Debt extinguishment expense
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
Earnings before income
|
|
|
|
|
|
tax expense
|
|
|
4.5
|
%
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
1.6
|
%
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
Net earnings
|
|
|
2.9
|
%
|
|
|
3.1
|
%
|
|
|
|
GameStop Corp.
|
|
Balance Sheets
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Oct. 31,
|
|
Nov. 1,
|
|
|
|
2009
|
|
2008
|
|
ASSETS:
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
292,027
|
|
$
|
478,056
|
|
|
Receivables, net
|
|
|
52,543
|
|
|
50,730
|
|
|
Merchandise inventories
|
|
|
1,733,962
|
|
|
1,424,249
|
|
|
Prepaid expenses and other current assets
|
|
|
91,059
|
|
|
170,671
|
|
|
Deferred taxes
|
|
|
24,503
|
|
|
29,200
|
|
|
Total current assets
|
|
|
2,194,094
|
|
|
2,152,906
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
Land
|
|
|
11,819
|
|
|
10,229
|
|
|
Buildings & leasehold improvements
|
|
|
516,492
|
|
|
404,660
|
|
|
Fixtures and equipment
|
|
|
692,660
|
|
|
590,565
|
|
|
|
|
|
1,220,971
|
|
|
1,005,454
|
|
|
Less accumulated depreciation and amortization
|
|
|
629,276
|
|
|
502,348
|
|
|
Net property and equipment
|
|
|
591,695
|
|
|
503,106
|
|
|
|
|
|
|
|
|
Goodwill, net
|
|
|
1,931,672
|
|
|
1,443,782
|
|
|
Other noncurrent assets
|
|
|
318,547
|
|
|
63,907
|
|
|
Total assets
|
|
$
|
5,036,008
|
|
$
|
4,163,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY:
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,328,041
|
|
$
|
1,102,639
|
|
|
Accrued liabilities
|
|
|
510,296
|
|
|
366,147
|
|
|
Total current liabilities
|
|
|
1,838,337
|
|
|
1,468,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
111,127
|
|
|
85,273
|
|
|
Senior notes payable, net of discount
|
|
|
447,121
|
|
|
545,462
|
|
|
Total liabilities
|
|
|
2,396,585
|
|
|
2,099,521
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
Preferred stock - authorized 5,000 shares; no shares
|
|
|
|
|
|
issued or outstanding
|
|
|
--
|
|
|
--
|
|
|
Class A common stock - $.001 par value; authorized 300,000 shares;
|
|
|
|
|
|
164,752 and 163,776 shares issued and outstanding, respectively
|
|
|
165
|
|
|
164
|
|
|
Additional paid-in-capital
|
|
|
1,334,481
|
|
|
1,299,721
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
122,944
|
|
|
(23,870
|
)
|
|
Retained earnings
|
|
|
1,181,833
|
|
|
788,165
|
|
|
Total stockholders' equity
|
|
|
2,639,423
|
|
|
2,064,180
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
5,036,008
|
|
$
|
4,163,701
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule I
|
|
GameStop Corp.
|
|
Sales Mix
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
13 Weeks Ended
|
|
|
|
Oct. 31, 2009
|
|
Nov. 1, 2008
|
|
|
|
|
|
Percent
|
|
|
|
Percent
|
|
|
|
Sales
|
|
of Total
|
|
Sales
|
|
of Total
|
|
Sales (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
321.4
|
|
17.5
|
%
|
|
$
|
328.4
|
|
19.3
|
%
|
|
New video game software
|
|
|
769.4
|
|
41.9
|
%
|
|
|
703.3
|
|
41.5
|
%
|
|
Used video game products
|
|
|
507.7
|
|
27.7
|
%
|
|
|
425.1
|
|
25.1
|
%
|
|
Other
|
|
|
236.2
|
|
12.9
|
%
|
|
|
238.9
|
|
14.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,834.7
|
|
100.0
|
%
|
|
$
|
1,695.7
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule II
|
|
GameStop Corp.
|
|
Gross Profit Mix
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
13 Weeks Ended
|
|
|
|
Oct. 31, 2009
|
|
Nov. 1, 2008
|
|
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
Gross
|
|
Profit
|
|
Gross
|
|
Profit
|
|
|
|
Profit
|
|
Percent
|
|
Profit
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
26.8
|
|
8.3
|
%
|
|
$
|
25.4
|
|
7.7
|
%
|
|
New video game software
|
|
|
173.8
|
|
22.6
|
%
|
|
|
158.5
|
|
22.5
|
%
|
|
Used video game products
|
|
|
240.0
|
|
47.3
|
%
|
|
|
204.8
|
|
48.2
|
%
|
|
Other
|
|
|
82.5
|
|
34.9
|
%
|
|
|
84.7
|
|
35.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
523.1
|
|
28.5
|
%
|
|
$
|
473.4
|
|
27.9
|
%
|
Source: GameStop Corp.
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
|
