GameStop Corporation ( GME ), the video game
and entertainment software retailer, recently posted
better-than-expected first-quarter fiscal 2013 results on the back
of improved digital and mobile businesses, gross margin improvement
and gain in market share.
The quarterly earnings of 46 cents a share not only surpassed
the Zacks Consensus Estimate of 40 cents but also came ahead of its
previously-provided guidance range of 38 cents to 43 cents a
But the company posted a year-over-year drop of 14.8% in
earnings from 54 cents earned in the year-ago quarter.
Let's Unveil the Picture
The Grapevine, Texas-based GameStop's total net sales of
$1,865.3 million fell 6.8% from the year-ago quarter but came ahead
of the Zacks Consensus Estimate of $1,844 million. Comparable-store
sales dropped 6.7% during the quarter. The fall in sales was due to
the lack of significant game title launches. Customers are
postponing their purchasing activities due to the launch of console
in the later part of the year.
By sales mix, new video game hardware sales slid 30.6% to $241.8
million, whereas new video game software sales dropped 3.8% to
$703.2 million. Moreover, pre-owned video game products sales
declined 7.5% to $572.6 million. However, sales in other category
jumped 14.6% to $347.7 million.
Year-to-date, the company has grabbed market share of 47.7% for
new PS3 and Xbox 360 software. Moreover, the fall in new video game
software sales for the company is far less when compared to the
industry decline of 14.2%.
Within other categories, digital receipts increased 47.3% year
over year, whereas Mobile sales came in at $46.8 million, surging
GameStop continued to branch out and transformed as a mixed
retailer of physical and digital gaming and electronics products.
The company's venture in digital, iDevice and gaming tablet
businesses would be accretive to its results.
During the quarter, gross profit tumbled 3.6% to $578.3 million
due to a fall in the top-line. However, gross margin expanded 100
basis points to 31%, reflecting a contraction in cost of sales as a
percentage of total net sales. Operating income declined 24.2% to
$87.2 million, while operating margin shriveled 100 basis points to
Other Financial Aspects
GameStop ended the quarter with cash and cash equivalents of
$245.7 million, net receivables of $57.2 million and shareholders'
equity of $2,296.3 million.
During the quarter, GameStop has bought back 1 million shares at
a price of $25.07 per share, totaling $25.5 million. The company
still has $400 million remaining at its disposal under its existing
share repurchase program.
GameStop declared a quarterly dividend 27.5 cents to be paid on
June 19, 2013, to stockholders of record as of June 4, 2013.
Strolling Through Guidance
Management now forecasts second-quarter fiscal 2013
comparable-store sales to decrease between 12.5% and 16%. Earnings
are predicted to be in the range of 1 cent to 7 cents a share.
For fiscal 2013, GameStop now expects comparable-stores sales to
be in the range of -5% to +1.5%. Earnings are projected between
$2.90 and $3.15 per share. Earlier, management had anticipated
comparable-stores sales to be in the range of -6% to +1.5% and
earnings in the band of $2.75 to $3.15 per share.
The current Zacks Consensus Estimate for the second quarter and
fiscal 2013 stands at 8 cents and $3.08 per share,
Currently, GameStop carries a Zacks Rank #3 (Hold). Other stocks
worth considering in the retail sector, include Conns
Inc. ( CONN ), which holds a
Zacks Rank #1 (Strong Buy) and Cabela's Inc. ( CAB ), which sports a
Zacks Rank #2 (Buy).CABELAS INC (CAB): Free Stock Analysis ReportCONNS INC (CONN): Free Stock Analysis ReportGAMESTOP CORP (GME): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment