GameStop Reports Third Quarter 2014 Results

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 compared to $2.11 billion in the prior year quarter. Consolidated comparable store sales were -2.3%.

New hardware sales increased 147.4%, outpacing industry growth of 102.4%. 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 improved 20.1% over last year, led by 91.4% growth in the pick-up at store program.

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.

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. In September 2014, the company issued $350 million in aggregate principal amount of 5.50% senior notes due 2019. On November 11, 2014, the company announced that its board 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.

Earnings Guidance

For the fourth quarter of fiscal 2014, GameStop expects comparable store sales to range from -5.0% to +2.0%. Diluted earnings per share are expected to range from $2.08 to $2.24.

For fiscal year 2014, diluted earnings per share are now expected to range from $3.40 to $3.55, excluding the non-recurring charges of $0.07. Full year comparable store sales are now expected to range from +2.0% to +5.0%.

Conference Call Information

A conference call with GameStop Corp.’s management is scheduled for November 20, 2014 at 4:00 p.m. CST to discuss the company’s financial results. The phone number for the call is 1-800-499-7921 and the pass code is 3850392. This call can also be accessed at GameStop Corp.’s investor relations home page at http://investor.GameStop.com/.

About GameStop

GameStop Corp. (NYSE: GME), a Fortune 500 and S&P 500 company headquartered in Grapevine, Texas, is a global, multichannel video game, consumer electronics and wireless services retailer. GameStop operates more than 6,600 stores across 14 countries.