GameStop Reports Q4 and FY 2013 Results

GameStop reported sales of $3.68 billion for the forth-quarter of 2013, a 3.4 percent increase over the $3.56 billion the company reported in the same period a year ago. It comes as no surprise that the retailer attributed the increase in sales to the launches of Sony's PlayStation 4 and Microsoft's Xbox One in November of last year.

GameStop's Q4 2013 net earnings were $220.5 million, down from $261.1 million in the same period a year ago. Diluted earnings per share in fourth quarter of 2013 were $1.89, compared to $2.15 in the fourth quarter of 2012. Q4 net earnings were impacted by charges related to what GameStop called "asset impairments" and the closure of game streaming service Spawn Labs, which it acquired in 2011.

GameStop's net earnings for the fiscal year 2013, were $354.2 million, compared to a net loss of $269.7 million in FY 2012. Total global sales for fiscal year 2013 were $9.04 billion, a 1.7 percent increase over FY 2012 global sales $8.89 billion. GameStop said that new video game software declined 2.8 percent, along with pre-owned and budget products – which declined 4.1 percent. Digital sales increased 15.1 percent to 217.7 million on a GAAP basis. Sales of consumer electronics and mobile devices increased 51.6 percent over 2012.

GameStop predicts a growth in net income between 12 and 22 percent in fiscal year 2014.

BMO Capital Markets analyst Edward S. Williams said that overall sales were 3 percent less than they had anticipated, but gross margins were a lot higher.

"While overall sales came in 3% lower than we expected, gross margins were 280 basis points higher, driven by stronger margins across all key segments relative to our expectations. As for operating expenses, SG&A expenses were materially higher than we estimated. Strong hardware sales augur well for the early stages of the next platform cycle; however, the weaker performance for legacy software creates a short-term headwind that pressures gross margins and near-term earnings."

"In general, GameStop continues to execute well in the current environment with significant leading market share on the new console platforms, but we see several significant challenges on the horizon – the rise of digitally distributed content, changing playing patterns, and increased pressure on used products. While it may take time for these challenges to manifest themselves in GameStop's P&L, we expect these currents to keep some potential shareholders at bay. In meantime, we expect the company to continue aggressively returning capital to shareholders through stock buybacks and dividends."

Source: Polygon

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