GameStop (GME) Fails to Impress in Q3 and Provides a More Cautious Sales Outlook
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Revenue Growth %: +10.1%
Financial Fact:
Income tax expense: 33.2M
Today's EPS Names:
BTTX, VAXX, ELYS, More
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Shares of GameStop Corp. (NYSE: GME) are slightly lower early Thursday after reporting ho-hum third quarter results and providing a weaker than expect sales outlook.
Total sales for the third quarter increased 2.5 percent year over year to $1.95 billion, and were slightly short of the consensus of $1.96 billion.
Comparable store sales were down 0.6 percent, due to lower than expected sales of new software. GameStop's digital sales increased 59 percent, with console digital growth of 63 percent and PC digital growth of 51 percent. Pre-owned sales increased 3.1%.
The top five-selling games during the quarter were Gears of War 3 by Microsoft (Nasdaq: MSFT), Battlefield 3 and Madden NFL 12 by Electronic Arts (Nasdaq: ERTS), Batman: Arkham City by Warner Home Video Games and Deep Silver’s Dead Island.
The cost of total sales for the quarter, which totaled 70.6 percent of total sales, increased 1.5 percent year over year to $1.373 billion. Gross profit for the quarter, which totaled 29.4 percent of total sales, grew 4.9 percent year over year to 572.9 million. Operating earnings for the quarter, which totaled 4.2 percent of total sales, totaled $82.5 million and fell 11 percent year over year.
Net earnings for the third quarter were $53.9 million compared to $54.7 million in the prior year quarter. Diluted earnings per share were in line with guidance at $0.39 and increased 8.3 percent year over year.
The company's cash and cash equivalents at the end of the quarter totaled $442.6 million, which represents an increase of 144 percent year over year.
Looking ahead to the fourth quarter, management at GameStop forecasts comparable store sales to range from flat to 2 percent and earnings to range from $1.66 to $1.76. The consensus for the quarter is $1.74.
For the full year 2011, the company is predicts total earnings of $2.82 to $2.92 per share, versus the consensus of $2.89. The company reduced its sales guidance from 4.5-6.5% to 2-3% and same-store sales from up 1-3% to down 1%-unchanged.
During the third quarter, GameStop repurchased 1.92 million shares at an average price of $22.09 and redeemed $125 million of its Senior Notes.
GameStop's board of directors also authorized a new $500 million share and debt repurchase program earlier this week, which will cancel out the $180 million remaining on its previous buyback plan. The funds will be used to repurchase the company’s stock and to call the $125 million of outstanding Senior Notes.
"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."
Total sales for the third quarter increased 2.5 percent year over year to $1.95 billion, and were slightly short of the consensus of $1.96 billion.
Comparable store sales were down 0.6 percent, due to lower than expected sales of new software. GameStop's digital sales increased 59 percent, with console digital growth of 63 percent and PC digital growth of 51 percent. Pre-owned sales increased 3.1%.
The top five-selling games during the quarter were Gears of War 3 by Microsoft (Nasdaq: MSFT), Battlefield 3 and Madden NFL 12 by Electronic Arts (Nasdaq: ERTS), Batman: Arkham City by Warner Home Video Games and Deep Silver’s Dead Island.
The cost of total sales for the quarter, which totaled 70.6 percent of total sales, increased 1.5 percent year over year to $1.373 billion. Gross profit for the quarter, which totaled 29.4 percent of total sales, grew 4.9 percent year over year to 572.9 million. Operating earnings for the quarter, which totaled 4.2 percent of total sales, totaled $82.5 million and fell 11 percent year over year.
Net earnings for the third quarter were $53.9 million compared to $54.7 million in the prior year quarter. Diluted earnings per share were in line with guidance at $0.39 and increased 8.3 percent year over year.
The company's cash and cash equivalents at the end of the quarter totaled $442.6 million, which represents an increase of 144 percent year over year.
Looking ahead to the fourth quarter, management at GameStop forecasts comparable store sales to range from flat to 2 percent and earnings to range from $1.66 to $1.76. The consensus for the quarter is $1.74.
For the full year 2011, the company is predicts total earnings of $2.82 to $2.92 per share, versus the consensus of $2.89. The company reduced its sales guidance from 4.5-6.5% to 2-3% and same-store sales from up 1-3% to down 1%-unchanged.
During the third quarter, GameStop repurchased 1.92 million shares at an average price of $22.09 and redeemed $125 million of its Senior Notes.
GameStop's board of directors also authorized a new $500 million share and debt repurchase program earlier this week, which will cancel out the $180 million remaining on its previous buyback plan. The funds will be used to repurchase the company’s stock and to call the $125 million of outstanding Senior Notes.
"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."
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