Gamestop hits $7.1 billion for fiscal 2007

By Patrick Garratt, Tuesday, 18 March 2008 18:33 GMT

US retailer Gamestop has acheived sales of $7.1 billion for fiscal 2007, an increase of 33 percent over fiscal 2006.

Net earnings were $288.3 million for the 52-week fiscal year 2007 compared to earnings of $158.3 million for the 53-week fiscal year 2006, an increase of 82.1 percent.

The company also opened 586 new stores worldwide and plans to open up to another 600 in 2008.

Sounds terrifying. Press release after the link.

GameStop Reports Record 2007 Sales and Earnings

2007 Sales and Net Earnings Grow 33% and 82%, respectively

Comparable Store Sales Increase 17.4% for Q4 and 24.7% for the Year

575 to 600 New Stores to be Opened Worldwide in 2008

Strong Growth Planned for 2008 and Long Range Earnings Target Reiterated

GRAPEVINE, Texas–(BUSINESS WIRE)–GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today reported sales and earnings for the fourth quarter and the fiscal year ended February 2, 2008. The company also issued guidance for fiscal 2008 and an outlook for the year to follow.

GameStop has become the world’s fastest growing retailer in the Fortune 500 by several metrics: sales of $7.1 billion for fiscal 2007, an increase of 33% over fiscal 2006; a 24.7% increase in comparable store sales; the opening of 586 new stores; and a 50% increase in operating earnings. Moreover, growth prospects remain favorable for continued rapid expansion in markets in various stages of development throughout the world.

The company continues to develop and identify additional growth opportunities in the more developed video game markets of the US, Canada and Australia, as well as building new stores in virtually all of the more immature markets across Europe. In 2007, GameStop opened 586 new stores worldwide. Operating cash flow funded all of the new openings and also provided a year end cash balance of $857 million.

Fourth Quarter Financial Results

Net earnings were $189.8 million for the 13-week fourth quarter of 2007, as compared to net earnings of $129.8 million for the 14-week fourth quarter of 2006, an increase of 46.2%. Diluted earnings per share were $1.14, compared to $0.81 per diluted share in the prior year quarter.

GameStop sales increased 24.4% to $2,865.6 million in the fourth quarter, in comparison to $2,304.0 million in the prior year quarter. On a comparable store basis, sales increased 17.4% during the fourth quarter. New video game software sales grew 38.4%. The top five selling games during the quarter were Activision’s CALL OF DUTY 4: MODERN WARFARE, ROCK BAND from Electronic Arts, ASSASSIN’S CREED by Ubisoft, Nintendo’s SUPER MARIO GALAXY, and Activision’s GUITAR HERO III.

Full Year Financial Results

Net earnings were $288.3 million for the 52-week fiscal year 2007, including debt retirement costs of $12.6 million ($7.9 million, net of tax benefits), as compared to earnings of $158.3 million for the 53-week fiscal year 2006, an increase of 82.1%. Diluted earnings per share were $1.75 for fiscal 2007, including debt retirement costs of $0.05 per diluted share, as compared to $1.00 per diluted share in fiscal 2006.

R. Richard Fontaine, Chairman and Chief Executive Officer, indicated, “Our performance in 2007 was impressive from many perspectives. But what is particularly noteworthy is that 2007 was a transformative year with hardware sales setting records and the installed base of users reaching an all-time high. Likewise, the expanding demographic profile of the video game player has moved this business into the mainstream of entertainment. This will be compounded by a strong 2008 video game title lineup and the value aspect of GameStop’s used model that appeals to a broad base of budget conscious consumers.

“Prospects for the 575-600 new store openings in 2008 look very promising even with the current concerns about the US economy. As one of the few American retailers actively seeking many new sites, GameStop is positioned to secure better locations with more advantageous lease terms and is more frequently being viewed as a critical brand to anchor strip centers,” concluded Fontaine.

Business Outlook

For fiscal 2008 (the 52-week year ending January 31, 2009), sales are projected to grow between 19.0% and 21.0%, with comparable store sales ranging from +10.0% to +12.0%, driven by a strong lineup of video game title releases across all platforms. Diluted earnings per share for the full year are expected to range from $2.25 to $2.34, an increase of between 25% and 30% over fiscal 2007. GameStop expects to open between 575 and 600 stores worldwide in fiscal 2008.

For the first quarter of fiscal 2008, the company expects comparable store sales to range from +24.0% to +25.0%, led by continued demand for all console and handheld systems as well as a strong slate of new video game releases, such as Nintendo’s SUPER SMASH BROS. BRAWL for the Wii, Capcom’s DEVIL MAY CRY 4 and GRAND THEFT AUTO IV from Take Two Interactive. Diluted earnings per share are expected to range from $0.32 to $0.33. This compares to earnings per share of $0.15 in the first quarter of 2007.

Looking beyond 2008, GameStop currently expects earnings per share to grow at least 25% in fiscal 2009 (the year ending January 2010) based on several key factors, including: the company’s growing worldwide retail footprint, the company’s ongoing cash generation, the continued expansion of the video game industry, and the broadening consumer base.

Note that guidance does not include debt retirement costs.

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