New hardware sales increase 147.4%
Digital receipts rise 52.4%
2014 Full Year Guidance Range Narrowed to $3.40 to $3.55; Indicates 13.5% to 18.5% Growth for 2014
GRAPEVINE, Texas — (BUSINESS WIRE) — November 20, 2014 — GameStop Corp. (NYSE: GME), a family of specialty retail brands that makes the most popular technologies affordable and simple, today reported sales and earnings for the third quarter ended November 1, 2014.
Third Quarter Results
Total global sales for the third quarter of 2014 were $2.09 billion, a decline of 0.7% compared to $2.11 billion in the prior year quarter. Consolidated comparable store sales were -2.3%. Topline and comparable store sales were negatively impacted by the delayed release of Assassin’s Creed Unity.
During the quarter, new hardware sales increased 147.4%, greatly outpacing industry growth of 102.4%. After the first 12 months since launch, the U.S. installed base of the Sony PlayStation 4 and Microsoft Xbox One is 73% greater than the PlayStation 3 and Xbox 360 base was over the same period.
The company reached 47.3% new software market share during the quarter, its second highest ever, despite new software sales declining 34.4%. The decrease was primarily due to overlapping the company’s record market share of last year’s AAA titles, such as Grand Theft Auto V, Battlefield 4, Batman: Arkham Origins, Pokemon X/Y, and Assassin’s Creed IV: Black Flag.
The pre-owned/value category recorded its third straight quarter of positive growth, +2.6%, led by consumers discovering value in the affordably priced pre-owned video game consoles.
Sales in the mobile & consumer electronics category rose 125.0%, led by continued expansion and strong results of Spring Mobile. The Technology Brands segment contributed 11.0% of the company’s third quarter operating profit, driven by an 11% operating margin.
Non-GAAP digital receipts increased 52.4% to $210.3 million, or $54.9 million of sales on a GAAP basis, led by growth of downloadable content, platform currency and international digital sales.
Global multichannel sales (mobile, web-in-store, pick-up at store, ecommerce) improved 20.1% over last year, led by 91.4% growth in the pick-up at store program, where customers can hold a product online and pick it up at a local store. The GameStop mobile app now has six million installs and 69% of www.gamestop.com’s visits originate from a mobile phone or tablet.
“Overall, most of our major product categories performed very well, but our third quarter results were impacted by Assassin’s Creed Unity moving out of October,” stated Paul Raines, chief executive officer. “As we look at the holiday quarter, we are focused on relentlessly applying our competitive advantages: convenience, strong CRM, knowledgeable associates and value through our unique forms of currency, which include buy-sell-trade and the new PowerUp Rewards credit card, to deliver a successful quarter.”
In the third quarter, as a result of the sale and shutdown of certain business operations, the company recorded non-recurring charges of $13.9 million, $7.9 million net of tax benefits, or $0.07 per share. A reconciliation of non-GAAP adjusted net income to GAAP net income is included with this release (Schedule III).
Excluding the one-time charges, GameStop’s adjusted net earnings for the third quarter were $64.3 million compared to net earnings of $68.6 million in the prior year quarter. Adjusted diluted earnings per share were $0.57 compared to adjusted diluted earnings per share of $0.58 in the prior year quarter.
Including the one-time charges, GameStop’s third quarter net earnings were $56.4 million compared to net earnings of $68.6 million in the prior year quarter. Diluted earnings per share were $0.50 compared to diluted earnings per share of $0.58 in the prior year quarter.
Capital Allocation Update
During the third quarter of 2014, GameStop repurchased 3.58 million shares at an average price of $40.25, or $144.0 million of stock, representing the highest amount deployed in a quarter since the company began its buyback program. Year-to-date, 6.8 million shares, or $271.7 million of stock, have been repurchased. Life-to-date, 67.4 million shares have been repurchased at an average price of $24.36 for a total of $1.64 billion.
In September 2014, the company announced that it had issued $350 million in aggregate principal amount of 5.50% senior notes due 2019 (which represents an upsizing of $100 million). The net proceeds from the offering were used to pay down the remaining outstanding balance of its asset-based facility and will be used for general corporate purposes, which may include acquisitions, dividends and stock buybacks.
On November 11, 2014, the company announced that its board of directors
approved a new $500 million share repurchase plan, replacing the
remaining $176 million available on the existing authorization.
GameStop’s board of directors also declared a quarterly cash dividend of
$0.33 per common share payable on December 16, 2014, to shareholders of
record as of the close of business on November 25, 2014.