), a video game and entertainment software retailer, posted
second-quarter fiscal 2014 earnings of 22 cents a share that came
ahead of the Zacks Consensus Estimate of 19 cents and rose
substantially from 9 cents delivered in the year-ago quarter. The
outperformance came on the back of new game releases and robust
hardware sales. This led the shares of this Zacks Rank #3 (Hold)
company to jump 5% in the after-market trading session
Gamestop Corp - Earnings Surprise |
Total net sales increased 25.1% year over year to $1,731.4
million, and handily surpassed the Zacks Consensus Estimate of
$1,656 million. Comparable-store sales grew 21.9% year over
Sturdy demand for Microsoft Corporation's (
) Xbox One and Sony Corporation's (
) PlayStation 4 aided the year-over-year increase in net sales and
comparable-store sales. Moreover, strength witnessed across the
mobile & consumer electronics category also supported top-line
By sales mix, new video game hardware sales surged over twofold
to $332.3 million owing to robust demand of PlayStation 4 and Xbox
One hardware while new video game software sales increased 15.6% to
$497 million attributable to recently released new titles such as
Ubisoft's Watch Dogs and Nintendo's Mario Kart 8. Pre-owned and
value video game products sales rose 5.5% to $558 million. Sales in
the other category declined 4.2% to $72.2 million.
Video game accessories sales surged 16.8% to $107.5 million
whereas sales in the digital category jumped 5.9% to $52.3 million.
On the other hand, mobile and consumer electronics sales soared 85%
to $112.1 million attributable to contributions from Simply Mac and
Spring Mobile. Digital receipts grew 17.6% to $179.2 million during
The Technology Brands segment sustained its growth momentum,
generating revenue of $70.1 million. Worldwide multichannel sales -
mobile, web-in-store, pick-up at store and ecommerce - increased
GameStop continued to branch out and is transforming itself into
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. The company
also remained optimistic of about the second half of the year on
the back of new game releases and robust growth in next-generation
During the quarter, gross profit increased 14.4% to $550.9
million attributable to healthy top-line growth, partly offset by
increased cost of sales. Gross margin contracted 300 basis points
to 31.8%. Operating income nearly doubled to $36.7 million, whereas
operating margin expanded 70 basis points to 2.1%.
Other Financial Aspects
GameStop, which competes with Best Buy Co., Inc. (
), ended the quarter with cash and cash equivalents of $193
million, net receivables of $91.2 million and shareholders' equity
of $2,181.4 million.
During the quarter, GameStop bought back 1.90 million shares
worth $75.5 million. The company still has $329.4 million at its
disposal under its share repurchase authorization.
GameStop declared a quarterly dividend of 33 cents a share to be
paid on Sep 16, to stakeholders of record as of Sep 3.
GameStop, at the end of the quarter, operated 6,698 outlets,
comprising 4,197 U.S. video game stores, 2,182 international video
game stores and 319 Technology Brand stores. The company acquired
26 Technology Brand stores and opened 23 additional stores. The
company also opened 6 video game outlets and shuttered 24 stores in
the U.S., and opened 4 and closed 17 stores internationally.
Management now forecasts third-quarter fiscal 2014
comparable-store sales to increase in the band of 1% to 5%
attributable to new video game hardware sales. However, new video
game software would face tough year-over-year comparison from Grand
Theft Auto V video game, released last year. For fiscal 2014,
GameStop continues to expect comps growth of 6% to 12%.
The company now envisions third-quarter earnings in the band of
58 cents to 64 cents and reiterated fiscal 2014 earnings of $3.40
to $3.70 per share.
The current Zacks Consensus Estimate for the third quarter and
fiscal 2014 stand at 57 cents and $3.72 per share,
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