Digital sales beat plan, increase 59%
iDevice trade velocity exceeds initial expectations
New stock buyback authorization announced
GRAPEVINE, Texas--(BUSINESS WIRE)--Nov. 17, 2011-- GameStop Corp. (NYSE: GME), the world’s largest multichannel video game retailer, today reported sales and earnings for the third quarter ended Oct. 29, 2011.
Financial Results
Total sales for the third quarter of 2011 were $1.95 billion, an increase of 2.5% compared to $1.90 billion in the prior year quarter. Total company comparable store sales were -0.6%, primarily impacted by lower than expected sales of new software. GameStop’s digital sales showed continued strength, increasing 59%, with console digital growing 63% and PC digital growing 51%. Pre-owned sales increased 3.1%.
New video game software grew 4.8%. The top five-selling games during the quarter were Gears of War 3 by Microsoft, Battlefield 3 and Madden NFL 12 by Electronic Arts, Batman: Arkham City by Warner Home Video Games and Deep Silver’s Dead Island.
Net earnings for the third quarter were $53.9 million compared to $54.7 million in the prior year quarter. As planned, the company continued to invest in its strategic initiatives, spending $0.03 per share during the quarter. Diluted earnings per share were in line with guidance at $0.39 compared to $0.36, including $0.02 of debt retirement costs, in the prior year quarter.
Paul Raines, chief executive officer, stated, “In the third quarter, GameStop outperformed the market and continued to execute against the long-term strategic plan through additional investments in digital and emerging businesses. We expect that our innovative digital, iDevice and gaming tablet businesses will supplement our leading retail business this holiday.
“As we begin the fourth quarter, the strong sell-through of November new title releases indicates a good start to the holiday season. We know that GameStop’s buy-sell-trade value proposition and PowerUp Rewards™ program with 14.5 million members place us on the short list of preferred shopping destinations.”
Earnings Guidance
For the fourth quarter of fiscal 2011, the company expects comparable store sales to range from flat to 2.0%. Diluted earnings per share are expected to range from $1.66 to $1.76.
GameStop is reiterating its full year diluted earnings per share guidance range of $2.82 to $2.92, representing a 6.4% to 10.2% increase over fiscal 2010. Full year comparable store sales are now expected to range from -1% to flat based on revised annual revenue growth of 2.0% to 3.0%.
Share Repurchase Update
During the third quarter, GameStop repurchased 1.92 million shares at an average price of $22.09, or $42.5 million worth of stock. The company also redeemed $125 million of its Senior Notes. At the end of the quarter, the company had approximately $180 million remaining of its current share and debt repurchase authorization.
Earlier this week, GameStop’s board of directors authorized a new $500 million share and debt repurchase program. This authorization replaces the amount remaining under the current plan announced in Feb. 2011. The funds will be used to repurchase the company’s stock and to call the $125 million of outstanding Senior Notes.
Rob Lloyd, chief financial officer, said, “GameStop’s commitment to improving return on invested capital and total shareholder return is underscored by today’s announcement of a new authorization of funds to be used for share buybacks and debt reduction.”
Under the program, GameStop may purchase shares or debt through open market purchases, debt calls or privately negotiated transactions in compliance with SEC regulations and other legal requirements. The timing and actual amount of shares or debt repurchased will depend on several factors, including price, capital availability and other market conditions. This repurchase program does not have any specific limitations and may be suspended or terminated at any time.
Conference Call and Webcast Information
A conference call with GameStop Corp.’s management is scheduled for Nov. 17, 2011 at 10:00 a.m. CST to discuss the third quarter sales and earnings results. The conference call will be simulcast online at http://investor.GameStop.com/. The conference call will also be archived on the website.
About GameStop
GameStop Corp. (NYSE: GME), a Fortune 500 and S&P 500 company headquartered in Grapevine, Texas, is the world's largest multichannel video game retailer. GameStop’s retail network and family of brands include 6,627 company-operated stores in 17 countries worldwide and online at www.GameStop.com. The network also includes: www.Kongregate.com, a leading browser-based game site; Game Informer(R) magazine, the leading multi-platform video game publication; Spawn Labs, a streaming technology company; and a digital PC game distribution platform available at www.GameStop.com/pc.