GameStop Q2 financials show sales drop of 3.7 percent

By Stephany Nunneley, Thursday, 20 August 2009 17:05 GMT

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GameStop has reported its Q2 financial results, and figures show a sales drop of 3.7 percent on last year which brings totals down from $1.80 billion in 2008 to $1.74 billion.

CEO Daniel DeMatteo said that the drop can be blamed on the recession and strong yearly comparisons.

“Looking ahead, as the new title release schedule improves, we expect positive earnings growth in the back half of the year,” said DeMatteo.

Net earnings totaled $38.7 million which is 32 percent drop from last year’s earnings of $57.2 million.

Used game sales increased 19 percent compared to last year, sales of which accounted for 32 percent of total sales for the company with 36 percent of sales by way of new games.

Used game sales accounted for 46 percent of overall profit, with new games making up 21 percent.

More over on GI.biz with the press release below the break.

GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today reported sales and earnings results for the second quarter ended August 1, 2009.

GameStop sales were $1.74 billion, a 3.7% decrease compared to sales of $1.80 billion in the prior year quarter. Despite gaining over 200 basis points in new video game market share during the quarter, comparable store sales decreased 14.1% due to lower new console unit sales, a lack of strong new software titles compared to last year’s record releases and customer caution due to the continued weak economy.

The top five selling games during the quarter were THQ’s UFC 2009 Undisputed, Activision’s Prototype, EA’s Fight Night Round 4 and NCAA Football 2010, and Atari’s Ghostbusters.

Net earnings were $38.7 million, representing the second highest summer quarter in GameStop history, a 32.3% decrease compared to net earnings of $57.2 million in the prior year period. Diluted earnings per share were $0.23, compared to $0.34 in the prior year quarter, when earnings per share grew 162%.

“Due to the effects of the recession and strong prior year comparisons, the video game industry experienced a sharp decline in consumer spending during the quarter,” said Daniel DeMatteo, GameStop CEO. “Looking ahead, as the new title release schedule improves, we expect positive earnings growth in the back half of the year.”

Updated Guidance

Weak trends in consumer spending related to on-going economic uncertainties, and some key new title slippage such as Bioshock 2, StarCraft II and Splinter Cell: Conviction, have prompted GameStop to forecast a lower and widened earnings range for the remainder of the year. In spite of these challenges, new software sales in the second half are expected to increase over the prior year period, led by highly-anticipated title releases such as Call of Duty: Modern Warfare 2, Assassin’s Creed 2 and Halo 3: ODST.

For the third quarter of fiscal 2009, GameStop is forecasting diluted earnings per share to range from $0.27 to $0.33, as compared to $0.28 in the prior year period. Comparable store sales are projected to range from -11.0% to -6.0%.

For the fourth quarter of fiscal 2009, GameStop is forecasting diluted earnings per share to range from $1.47 to $1.65, as compared to $1.39 in the prior year period. Comparable store sales are projected to range from -7.0% to -1.0%.

For fiscal 2009, GameStop is lowering diluted earnings per share guidance from the previously communicated range of $2.83 to $2.93 to a range of $2.40 to $2.64, representing annual EPS growth of flat to +10%. Comparable store sales are now projected to range from -8.0% to -4.0% in fiscal 2009.

We now expect to generate free cash flow (a non-GAAP measure of operating cash flow less capital expenditures) of approximately $400 to $425 million, after having invested $175 million in capital improvements, including the opening of approximately 400 new stores worldwide.

Note that guidance does not include debt retirement costs or merger-related expenses.

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