GameStop Posts $270M Net Loss

Good luck reading this press release if you hate numbers like me so let me consolidate.

People are buying less game CD’s and DVD’s. I haven’t bought a physical game since I last bought a physical music CD. Weird that they are losing money considering their trade-in rip-off but maybe that’s driving customers away. They certainly aren’t admitting anything.

GameStop Posts $270M Net Loss


Here is the press release:

GameStop Corp. (NYSE: GME), the world’s largest multichannel video game retailer, today reported sales and earnings for the fourth quarter and fiscal year ended Feb. 2, 2013. The fourth quarter and fiscal year 2012 results include an extra week compared to fiscal 2011.

Paul Raines, chief executive officer, stated, “While 2012 was a challenging year for console gaming, we focused on factors within our control. We expanded our market leadership position, maintained our financial strength and controlled our spending. Perhaps most importantly, we invested in our mobile and digital businesses to position the company for future success. These channels delivered as planned and significantly contributed to our highest ever gross margin and profitability.”

Fourth Quarter Results

Total global sales for the fourth quarter of 2012 were $3.56 billion compared to $3.58 billion in the prior year quarter. Consolidated comparable store sales decreased 4.6% compared to the prior year quarter. Fourth quarter sales were essentially flat to the prior year quarter, which included 60.3% growth in digital receipts and $100.0 million of mobile sales offsetting weakness in the core business.

In the fourth quarter, the company recorded asset impairment charges of $1.9 million ($1.2 million, net of tax benefits), or $0.01 per share, as a result of impairment tests of property, equipment and other assets. A reconciliation of non-GAAP adjusted net income to GAAP net income is included with this release (Schedule III).

Excluding the impairment charges, GameStop’s adjusted net earnings for the fourth quarter increased 9.5% to $262.3 million compared to adjusted net earnings of $239.5 million in the prior year quarter. The increase in earnings was primarily due to the positive impact of the 53rd week in 2012 and a 100 basis point improvement in the gross margin rate.

Adjusted diluted earnings per share were in-line with guidance at $2.16, a 24.9% increase compared to adjusted diluted earnings per share of $1.73 in the prior year quarter. The 53rd week contributed approximately $10.1 million of net earnings, or $0.08 per diluted share, to the fourth quarter.

Including the impairment charges, GameStop’s fourth quarter net earnings were $261.1 million compared to net earnings of $174.7 million in the prior year quarter. Diluted earnings per share were $2.15 compared to diluted earnings per share of $1.27 in the prior year quarter.

Fiscal 2012 Results

For fiscal year 2012, total global sales were $8.89 billion, a 7.0% decrease compared to $9.55 billion in fiscal 2011. Full year consolidated comparable store sales declined 8.0% compared to fiscal 2011. Digital receipts and mobile sales drove a 21.2% increase in the Other category. New hardware, new software and pre-owned sales each declined year-over-year primarily due to the effect of the longevity of the current console cycle.

Excluding restructuring, impairment and debt retirement expenses, GameStop’s adjusted net earnings for fiscal year 2012 were $403.0 million compared to adjusted net earnings of $405.1 million in fiscal 2011. Adjusted diluted earnings per share were $3.17, exceeding consensus and increasing 10.5% compared to adjusted diluted earnings per share of $2.87 in fiscal 2011. The increase in EPS was primarily the result of share buybacks.

Including restructuring, impairment and debt retirement expenses of $680.7 million ($672.7 million, net of tax benefit) primarily related to goodwill impairment in the third quarter of 2012, GameStop’s fiscal 2012 net loss was $269.7 million compared to net earnings of $339.9 million in fiscal 2011. Diluted loss per share was $2.13 compared to diluted earnings per share of $2.41 in fiscal 2011. A reconciliation of non-GAAP adjusted net income to GAAP net income (loss) is included with this release (Schedule III).

The gross margin rate expanded 170 basis points during fiscal 2012 driven by margin improvements in new and pre-owned video game products as well as growth of digital receipts and advances in our mobile business. In the last four years, GameStop has expanded gross margins by 400 basis points.

Source: Joystiq.