GameStop Reports Third Quarter Results, A Positive Start to Fourth Quarter with November Comparable Store Sales Increasing 16.5% And Sustained Progress Toward Long-Term Strategic Objectives
GameStop reported a 257% surge in global e-commerce sales for Q3 2020, demonstrating strong omni-channel capabilities. While net sales totaled $1,004.7 million, a 30.2% decline from the previous year, comparable store sales fell 24.6% amidst a challenging environment. The company reduced SG&A expenses by $115 million, achieving a net loss of $18.8 million, significantly improved from the prior year's loss of $83.4 million. With $603 million in cash reserves, GameStop anticipates positive sales growth in Q4 2020 driven by new console demand and ongoing strategic initiatives.
- 257% increase in global E-Commerce sales.
- $115 million reduction in SG&A expenses.
- Achieved $603 million in cash and restricted cash.
- 30.2% decline in net sales year-over-year.
- 24.6% drop in comparable store sales.
Omni-channel Capabilities Fuel
Operating Platform Optimization Drives
GRAPEVINE, Texas, Dec. 08, 2020 (GLOBE NEWSWIRE) -- GameStop Corp. (NYSE: GME) today reported results for the third quarter ended October 31, 2020 that reflect sustained progress toward its long-term strategic objectives and a positive start to the fourth fiscal quarter following the launch of the long-awaited next generation of video game consoles.
George Sherman, GameStop’s chief executive officer, said, “Our third quarter results were in-line with our muted expectations and reflected operating during the last few months of a seven-year console cycle and a global pandemic, which pressured sales and earnings. That notwithstanding, we continued to significantly advance our strategic objectives of creating a digital-first, omni-channel ecosystem for games and entertainment and optimizing our core operations. Leveraging our omni-channel capabilities, we increased E-Commerce sales
“We begin the fourth quarter with unprecedented demand in new video game consoles that launched in November, which drove a
Third Quarter Sales Results:
- Net sales were
$1,004.7 million , down30.2% from the fiscal 2019 third quarter reflecting:- The impact of operating during the last few months of the seven-year-long current generation console cycle and the subsequent limited availability of hardware and accessories;
- The unplanned shift of software titles later into the fourth fiscal quarter, and in some cases, into fiscal 2021;
- An
11% reduction in the store base, as part of the Company’s de-densification strategy, partially offset by recaptured sales through the transfer to neighboring locations and online
- Comparable store sales declined
24.6% - Global E-Commerce sales increased
257% and are included in comparable store sales
Progress Toward Strategy:
Optimize the core business by improving efficiency and effectiveness across the organization:
- Delivered a
$115.0 million reduction in SG&A in the third quarter and a$315.9 million reduction in the first nine months of fiscal 2020 from the comparable periods of fiscal 2019 through continued expense reduction initiatives; - Continued to transform physical store presence through the ongoing market optimization and de-densification of the GameStop store base, closing 74 stores in the quarter and bringing the year-to-date closures to 462 while transferring sales to neighboring locations and on-line, and reducing store operating costs
- Maintained a strong balance sheet with:
$602.6 million of cash and restricted cash at quarter end and reduced borrowings under its asset-based revolving credit facility by$10.0 million to$25.0 million ; and- A
33% decrease in inventory and a38% decrease in accounts payable as compared to the third quarter of fiscal 2019
- Executed two sale leaseback transactions related to office buildings, contributing approximately
$43.7 million towards total liquidity; and - Subsequent to the end of the third fiscal quarter, the Company announced the voluntary early redemption of
$125 million in principal amount of its6.75% senior notes due 2021, on December 11, 2020. This voluntary early redemption covers approximately63% of the outstanding Notes and reflects the Company’s strategy to strengthen and enhance its balance sheet, improve its debt profile and optimize its capital structure
Build a frictionless digital ecosystem to position GameStop as a digital-first omni-channel retailer:
- Delivered a
257% increase in global E-Commerce sales during the quarter to represent over18% of total net sales and nearly25% year to date. - Leveraged improved fulfillment capabilities, including the initial roll-out of same-day delivery option to over 2,000 stores, enhancing customers’ shopping and delivery experience.
- Continued to enhance the customer experience by offering easier and more convenient options, including a personalized home page for website browsing and improved site navigation, post-purchase experience enhancements, the launch of a new mobile app featuring an improved shopping experience and a full suite of flexible payment options.
Additional Third Quarter Highlights:
(See reconciliation table of GAAP results to non-GAAP adjusted results in Schedule II and III of this press release.)
- Gross margin declined 320 bps from the prior year third quarter, with an increase in the mix of collectibles sales, a higher-margin product category, more than offset by the mix of hardware sales, which carry a lower gross margin, and an increase in industry-wide freight costs and credit card processing fees as a result of higher E-Commerce sales penetration
- SG&A was
$360.4 million , down$115 million or24.2% compared to$475.4 million in the prior year third quarter - Adjusted SG&A was
$359.7 million , a reduction of$100.0 million , or21.8% from adjusted SG&A in the prior year third quarter - Operating loss of (
$63.0) million compared to operating loss of ($45.6) million in the prior year third quarter - Income tax in the third quarter of fiscal 2020 was a benefit of
$53.9 million driven by a change in the tax status of certain foreign entities and the impact of the CARES Act, including tax benefits associated with the availability of a five-year carryback period for certain current year tax losses, compared to income tax expense of$31.6 million in the prior year third quarter - Net loss of (
$18.8) million , or ($0.29) per diluted share, compared to net loss of ($83.4) million , or loss per share of ($1.02) per diluted share in the prior year third quarter - Adjusted EBITDA of (
$61.8) million compared to$7.7 million in the prior year third quarter - Adjusted net loss from continuing operations of (
$34.4) million or ($0.53) per diluted share, compared to adjusted net loss from continuing operations of ($40.2) million , or ($0.49) per diluted share in the prior year third quarter
Capital Allocation and Liquidity Update
As of October 31, 2020, the Company had
As of October 31, 2020, the Company had
As part of its strategies to create optimal financial flexibility and expand liquidity alternatives, the Company intends to file a shelf registration and prospectus supplement with the Securities and Exchange Commission today under which it may offer and sell, from time to time, shares of its Class A common stock in “at-the-market offerings.” Net proceeds from sales of shares under the “at-the-market” program, if any, would be used for working capital and general corporate purposes, which may include funding of the Company’s ongoing digital-first omni-channel growth strategy and expansion of its product and services offering. The timing and amount of sales of shares, if any, will depend on a variety of factors, including prevailing market conditions, the trading price of shares, and other factors as determined by the Company.
Jim Bell, GameStop’s chief financial officer, said, “As we continue to optimize our business model, we are shifting focus to execute the transformational components of our strategy that will position GameStop to be a leading omni-channel retailer for all things games and entertainment, which we believe will lead to sustained long-term profitable growth. Over the past 18 months, we have remained steadfast in focusing on creating a more efficient business model. These efforts, despite the impacts of a global pandemic, have led to a stronger balance sheet. We believe the shelf registration and associated at-the-market program, if we chose to use it, provide us further options to enhance our liquidity alternatives to support an efficient and successful execution of our transformational strategies.”
In respect of the at-the-market program, the Company intends to file a registration statement (including a prospectus) with the SEC for the offering of shares thereunder. Before you invest, you should read the prospectus in that registration statement and other documents the Company intends to file with the SEC for more complete information about the Company and the offering. After these documents are filed, you may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the company will arrange to send you the prospectus after filing if you request it by calling (817) 424-2001.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy any security, nor shall there be any sale of the Company's Class A common stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
Fiscal Fourth Quarter 2020 Outlook (13 weeks ending January 30, 2021)
The Company continues to focus on efforts that position it to manage through this unprecedented time, including maintaining its balance sheet strength, prioritizing the allocation of resources to areas of the business that produce strong cash flow, reducing expenses across the business, developing and expanding its digital strategy, and intensifying inventory discipline. Due to the uncertainty around the duration and evolving impact of COVID-19, the Company is continuing to suspend guidance, however it expects to realize positive comparable store sales results and profitability in the fiscal fourth quarter. For fiscal November 2020, comparable store sales increased
Conference Call Information
A conference call with GameStop Corp.’s management is scheduled for December 8, 2020 at 5:00 p.m. ET to discuss the Company’s financial results. The phone number for the call is 877-451-6152 and the confirmation code is 13713035. This call, along with supplemental information, can also be accessed at GameStop Corp.’s investor relations home page at http://investor.GameStop.com/. The conference call will be archived for two months on GameStop’s corporate website.
About GameStop.
GameStop Corp., a Fortune 500 company headquartered in Grapevine, Texas, is a digital-first omni-channel retailer, offering games and entertainment products in its over 5,000 stores and comprehensive e-Commerce properties across 10 countries. GameStop, through its family of brands offers the best selection of new and pre-owned video gaming consoles, accessories and video game titles, in both physical and digital formats. GameStop also offers fans a wide variety of POP! vinyl figures, collectibles, board games and more. Through GameStop’s unique buy-sell-trade program, gamers can trade in video game consoles, games, and accessories, as well as consumer electronics for cash or in-store credit. The company's consumer product network also includes www.gamestop.com and Game Informer® magazine, the world's leading print and digital video game publication.
General information about GameStop Corp. can be obtained at the Company’s corporate website. Follow @GameStop and @GameStopCorp on Twitter and find GameStop on Facebook at www.facebook.com/GameStop.
Non-GAAP Measures and Other Metrics
As a supplement to our financial results presented in accordance with U.S. generally accepted accounting principles (GAAP), GameStop may use certain non-GAAP measures, such as adjusted SG&A, adjusted operating income (loss), adjusted net income (loss), adjusted earnings (loss) per share, adjusted EBITDA and free cash flow. We believe these non-GAAP financial measures provide useful information to investors in evaluating our core operating performance. Adjusted selling, general and administrative expenses (“Adjusted SG&A”), adjusted operating income (loss), adjusted net income (loss) and adjusted earnings (loss) per share exclude the effect of items such as transformation costs, asset impairments, store closure costs, severance, non-operating tax charges, as well as divestiture costs. Results reported as constant currency exclude the impact of fluctuations in foreign currency exchange rates by converting our local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our current period reported results. Our definition and calculation of non-GAAP financial measures may differ from that of other companies. Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company’s financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company’s financial position, results of operations or cash flows and should therefore be considered in assessing the Company’s actual and future financial condition and performance. A complete definition of comparable store sales can be found in the Company’s Form 10-Q.
Cautionary Statement Regarding Forward-Looking Statements - Safe Harbor
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management’s current beliefs, views, estimates and expectations, including as to the Company’s industry, business strategy, goals and expectations concerning its market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information, including expectations as to future operating profit improvement. Such statements include without limitation those about the Company’s financial results, expectations and other statements that are not historical facts. Forward-looking statements are subject to significant risks and uncertainties and actual developments, business decisions and results may differ materially from those reflected or described in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those reflected or described in the forward-looking statements: macroeconomic pressures, including the effects of COVID-19 on consumer spending and the Company’s ability to keep stores open; the impact of the COVID-19 pandemic on the Company’s business and financial results; the economic conditions in the U.S. and certain international markets; the cyclicality of the video game industry; the Company’s dependence on the timely delivery of new and innovative products from its vendors; the impact of technological advances in the video game industry and related changes in consumer behavior on the Company’s sales; the Company’s ability to keep pace with changing industry technology and consumer preferences; the impact of international crises and trade restrictions and tariffs on the delivery of the Company’s products; the Company’s ability to obtain favorable terms from its suppliers; the international nature of the Company’s business; the Company’s dependence on sales during the holiday selling season; fluctuations in the Company’s results of operations from quarter to quarter; the Company’s ability to de-densify its global store base; the Company’s ability to renew, terminate or enter into new leases on favorable terms; the competitive nature of the Company’s industry; the Company’s ability to attract and retain executive officers and key personnel; the adequacy of the Company’s management information systems; the Company’s reliance on centralized facilities for refurbishment of its pre-owned products; the Company’s ability to react to trends in pop culture with regard to its sales of collectibles and dependence on licensed products for a substantial portion of such sales; the Company’s ability to maintain security of its customer, employee or company information; potential harm to the Company’s reputation; the Company’s ability to maintain effective control over financial reporting; the Company’s vendors’ ability to provide marketing and merchandise support at historical levels; restrictions on the Company’s ability to purchase and sell pre-owned video games; potential decrease in popularity of certain types of video games; changes in the Company’s global tax rate; potential future litigation and other legal proceedings; changes in accounting rules and regulations; and the Company’s ability to comply with federal, state, local and international law. Additional factors that could cause results to differ materially from those reflected or described in the forward-looking statements can be found in Exhibit 99.4 of GameStop's Current Report on Form 8-K filed on June 5, 2020 and in GameStop’s Quarterly report on Form 10-Q filed on September 9, 2020 and other filings made from time to time with the SEC and available at the SEC's Internet site at http://www.sec.gov or http://investor.GameStop.com. Forward-looking statements contained in this release speak only as of the date of this release. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.
GameStop Corp.
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
| 13 Weeks Ended October 31, 2020 | 13 Weeks Ended November 2, 2019 | ||||||||
| Net sales | $ | 1,004.7 | $ | 1,438.5 | |||||
| Cost of sales | 728.4 | 997.4 | |||||||
| Gross profit | 276.3 | 441.1 | |||||||
| Selling, general and administrative expenses | 360.4 | 475.4 | |||||||
| Asset impairments | — | 11.3 | |||||||
| Gain on sale of assets | (21.1 | ) | — | ||||||
| Operating loss | (63.0 | ) | (45.6 | ) | |||||
| Interest expense, net | 9.7 | 6.0 | |||||||
| Loss from continuing operations before income taxes | (72.7 | ) | (51.6 | ) | |||||
| Income tax (benefit) expense | (53.9 | ) | 31.6 | ||||||
| Net loss from continuing operations | (18.8 | ) | (83.2 | ) | |||||
| Loss from discontinued operations, net of tax | — | (0.2 | ) | ||||||
| Net loss | $ | (18.8 | ) | $ | (83.4 | ) | |||
| Basic loss per share: | |||||||||
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FAQ
What were GameStop's Q3 2020 financial results?
GameStop reported net sales of $1,004.7 million, a 30.2% decline from Q3 2019, with a net loss of $18.8 million.
How much did GameStop's e-commerce sales increase in Q3 2020?
GameStop's e-commerce sales surged by 257% in Q3 2020.
What is the cash position of GameStop as of Q3 2020?
As of Q3 2020, GameStop had $603 million in cash and restricted cash.
What is the outlook for GameStop's Q4 2020 sales?
GameStop anticipates positive year-on-year sales growth and profitability in Q4 2020, driven by demand for new gaming consoles.
What were the key strategic initiatives mentioned by GameStop?
GameStop focused on optimizing operations, enhancing digital capabilities, and reducing expenses.
GameStop Corp.
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Specialty Retail
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