UPDATE: GameStop (GME) Holiday Comps Decline 3.1%; Updates Q4, FY14 Comps Outlook

(Updated - January 13, 2015 4:07 PM EST)

GameStop Corp. (NYSE: GME) reported sales results for the nine-week holiday period ended January 3, 2015.

Total global sales for the holiday period were $2.94 billion, a 6.7% decline compared to the 2013 holiday sales period, or -4.0% in constant currency. Due to the current strength of the U.S. dollar, the company’s sales were negatively impacted by foreign currency exchange rates as described in this release.

Total comparable store sales decreased 3.1%, comprised of -3.3% in the U.S. and -2.7% internationally. By month, November’s comparable store sales declined 12.0% as the company overlapped last November’s PS4 and Xbox One console launches, while December’s comparable store sales increased 4.4%.

Paul Raines, chief executive officer, stated, “During the holiday period, consumer demand for video games was strong, resulting in new software sales growth. We expect that trend to continue into the first quarter. Overall, each of our business units performed well giving us positive momentum as we look toward 2015.”

New software sales grew 5.8%, or 8.9% in constant currency. The growth was driven by a 94.4% increase in PS4 and Xbox One software, led by titles such as Activision’s Call of Duty: Advanced Warfare, Rockstar’s Grand Theft Auto V and Ubisoft’s Far Cry 4.

Sales of new hardware declined 32.0%, or 29.8% in constant currency. The decline was primarily attributable to overlapping last year’s new console launches and lower unit price points this year. Demand for next generation hardware continues to be strong demonstrated by the 31.3% increase in units sold in December 2014 compared to December 2013.

The pre-owned/value category decreased 1.3%; however, it increased 1.0%, +1.3% in the U.S. and flat internationally, in constant currency.

Sales in the mobile & consumer electronics category increased 28.0%, or 28.6% in constant currency. The growth was driven by a 75.8% rise in Technology Brands revenues.

Non-GAAP digital receipts increased 42.8%, or 46.4% in constant currency, to $296.6 million, or $53.2 million of sales on a GAAP basis. The increase was driven primarily by console digital sales, which grew more than 50% compared to the prior year period.

Capital Allocation Update

During the holiday period, GameStop repurchased 1.23 million shares of common stock at an average price of $38.62, or $47.5 million worth of stock. As of the end of the holiday period, the company had approximately $461.5 million remaining of its current share repurchase authorization.

Guidance Update

Based on the holiday sales results, GameStop is reiterating its previously announced fourth quarter and full year earnings per share guidance ranges of $2.08 to $2.24 and $3.40 to $3.55, respectively. GameStop now expects comparable store sales for the fourth quarter and the full year to range from -2.5% to -1.0% and 3.0% to 4.0%, respectively.

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