), the video game and entertainment software retailer, recently
posted better-than-expected second-quarter fiscal 2013 results on
the back of digital and mobile businesses, effective cost
management, gross margin improvement and gain in market
The quarterly earnings of 9 cents a share not only surpassed
the Zacks Consensus Estimate of 4 cents but also came ahead of
its previously provided guidance range of 1 cent to 7 cents a
But what paint the picture dull was year-over-year drop of
43.8% in earnings from 16 cents earned in the year-ago
Let's Unveil the Picture
The Grapevine, Texas-based GameStop's total net sales of
$1,383.7 million dipped 10.7% from the year-ago quarter, and also
fell short of the Zacks Consensus Estimate of $1,393 million.
Comparable-store sales dropped 10.7% 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
By sales mix, new video game hardware sales slid 19.4% to
$147.8 million, whereas new video game software sales dropped
9.3% to $429.8 million. Moreover, pre-owned video game products
sales declined 6% to $528.7 million. Sales in other category
plunged 16.1% to $277.4 million.
The fall in new video game software sales for the company is
narrower than the industry's decline, and gained a market share
of 290 basis points.
Within its other category, digital receipts increased 17.9%
year over year to $158 million, whereas Mobile sales came in at
$55.1 million, surging 121.4%.
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 7.3% to $481.4
million due to fall in the top-line, however, gross margin
expanded 130 basis points to 34.8%, reflecting a contraction in
cost of sales as a percentage of total net sales. Operating
income declined 45.5% to $18.8 million, while operating margin
shriveled 90 basis points to 1.4%.
Other Financial Aspects
GameStop, which competes with
), ended the quarter with cash and cash equivalents of $199.5
million, net receivables of $55.7 million and shareholders'
equity of $2,156.7 million.
During the quarter, GameStop has bought back 2.39 million
shares at a price of $37.21 per share, totaling $88.9 million.
The company still has $311 million remaining at its disposal
under its existing share repurchase program.
GameStop declared a quarterly dividend 27.5 cents to be paid
on Sep 19, 2013, to stockholders of record as of Sep 3, 2013.
Strolling Through Guidance
Management now forecasts third-quarter fiscal 2013
comparable-store sales to increase between 11% and 15%. Earnings
are predicted to be in the range of 50 cents to 55 cents a
For fiscal 2013, GameStop now expects comparable-stores sales
to be in the range of -3.5% to +1.5%. Buoyed by
stronger-than-anticipated second-quarter results, favorable
trends seen in new console pre-orders and better-than-expected
launch quantity allocation, management now envisions earnings
between $3.00 and $3.20 per share.
Earlier, management had anticipated earnings in the band of
$2.90 to $3.15 per share.
The current Zacks Consensus Estimate for the third quarter and
fiscal 2013 stands at 35 cents and $3.14 per share,
Currently, GameStop carries a Zacks Rank #2 (Buy). Other
stocks worth considering in the retail sector, include
Fortune Brands Home & Security, Inc.
Lumber Liquidators Holdings, Inc.
), all sporting a Zacks Rank #1 (Strong Buy).
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