GameStop Reports First Quarter Fiscal 2019 Results
Grapevine, Texas (June 4, 2019)—GameStop Corp. (NYSE: GME), today reported sales and earnings for the first quarter ended May 4, 2019.
George Sherman, GameStop’s chief executive officer said, “Since joining GameStop in April, I have been undertaking a thorough review of the business and working closely with the team to improve our operational and financial performance, address the challenges that have impacted our results, and execute both deliberately and with urgency. We believe we will transform the business and shape the strategy for the GameStop of the future. This will be driven by our go-forward leadership team that is now in place, a multi-year transformation effort underway, a commitment to focusing on the core elements of our business that are meaningful to our future, and a disciplined approach to capital allocation.”
First Quarter Results
Total global sales decreased 13.3% (11.5% in constant currency) to $1.5 billion, resulting in a consolidated comparable store sales decrease of 10.3% (10.2% in the U.S. and 10.4% internationally).
New hardware sales decreased 35.0%, with an increase in Nintendo Switch sales more than offset by a decline in Xbox One and PlayStation 4 console sales.
New software sales decreased 4.3%, driven by weaker new title launches in the quarter compared to last year.
Accessories sales increased 0.6% on the continued strength of controller sales.
Pre-owned sales declined 20.3% reflecting declines in hardware and software.
Digital receipts decreased 6.7% to $255.4 million, driven by weaker title launches in the quarter compared to last year.
Collectibles sales increased 10.5% to $157.3 million, with continued growth in both domestic and international stores.
GameStop’s first quarter GAAP net income was $6.8 million, or $0.07 per diluted share, compared to net income of $28.2 million, or $0.28 per diluted share, in the prior-year quarter, which included the Spring Mobile business.
GameStop's net income from continuing operations for the first quarter was $7.5 million or $0.07 per diluted share, compared to net income from continuing operations of $20.4 million, or $0.20 per diluted share, in the prior-year quarter. First quarter fiscal 2018 net income included severance and other charges of $11.2 million ($9.7 million net of taxes). First quarter fiscal 2018 adjusted net income from continuing operations was $30.1 million or $0.30 per diluted share.
A reconciliation of non-GAAP results, including adjusted net income from continuing operations, operating earnings from continuing operations and total operating earnings, to its closest GAAP measure is included with this release (Schedule III).
Capital Allocation Update
On June 3, 2019, GameStop’s board of directors elected to eliminate the company’s quarterly dividend, effective immediately, in an effort to strengthen the company’s balance sheet and provide increased financial flexibility and optionality. Eliminating the company’s quarterly common stock dividend will preserve approximately $157 million in cash annually, based on the amount of dividends paid in 2018, and enable the company to further reduce its outstanding debt and provide flexibility to drive value creation for shareholders. As of June 3, 2019, the company has reduced the total amount outstanding on its 2021 unsecured notes by approximately $39 million, leaving $436 million outstanding.
Dan DeMatteo, GameStop’s executive chairman said, “With our operating profit improvement initiative well underway, we are focused on executing on the significant opportunities available to us to transform GameStop for the future. The board is confident that redirecting capital towards debt reduction and transformation initiatives will create additional shareholder value over the long-term.”
As previously announced on April 2, 2019, GameStop is currently implementing a cost-savings and operating profit improvement initiative designed to strengthen the organization for the future and support long-term improved financial performance and profitability. These initiatives, which include supply chain efficiencies, operational improvements, expense savings and pricing and promotion optimization, commenced during the first fiscal quarter of 2019. The company remains on track to achieve annualized operating profit improvements of approximately $100 million.
The following information was filed by Gamestop Corp. (GME) on Tuesday, June 4, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.