GRAPEVINE, Texas, Dec. 08, 2020 (GLOBE NEWSWIRE) -- GameStop Corp. (NYSE: GME) today reported results for the third quarter ended October 31, 2020 that reflect sustained progress toward its long-term strategic objectives and a positive start to the fourth fiscal quarter following the launch of the long-awaited next generation of video game consoles.

George Sherman, GameStop’s chief executive officer, said, “Our third quarter results were in-line with our muted expectations and reflected operating during the last few months of a seven-year console cycle and a global pandemic, which pressured sales and earnings. That notwithstanding, we continued to significantly advance our strategic objectives of creating a digital-first, omni-channel ecosystem for games and entertainment and optimizing our core operations. Leveraging our omni-channel capabilities, we increased E-Commerce sales 257% – demonstrating our ability to serve our customers, wherever, whenever and however they choose to shop. Investments in improving our web properties and mobile app and enhanced fulfillment capabilities contributed to our E-Commerce channel’s sales contribution rising to nearly 25% year to date, well-above historical mid-single digit levels. Moreover, as the result of our ongoing optimization of expenses, stores and inventory, we delivered a $316 million reduction in SG&A expenses through the third quarter, ending the period with $603 million cash and restricted cash after repaying $10 million in debt during the quarter, and saw a 33% reduction in inventory compared to the prior year.”

“We begin the fourth quarter with unprecedented demand in new video game consoles that launched in November, which drove a 16.5% increase in comparable store sales for the month, despite being closed on Thanksgiving Day and the impact of COVID-19 related store closures, which affected most of our European footprint. We anticipate, for the first time in many quarters, that the fourth quarter will include positive year-on-year sales growth and profitability, reflecting the introduction of new gaming consoles, our elevated omni-channel capabilities and continued benefits from our cost and efficiency initiatives, even with the potential further negative impacts on our operations due to the global COVID-19 pandemic. Overall, we remain confident in our strategy and look forward to executing in 2021 on the many exciting opportunities to leverage our brand, extensive loyalty member base, and increased digital capabilities to expand our addressable market and product offerings, providing growth in all things games and entertainment,” Sherman concluded.

Third Quarter Sales Results:

• Net sales were $1,004.7 million, down 30.2% from the fiscal 2019 third quarter reflecting:
  • The impact of operating during the last few months of the seven-year-long current generation console cycle and the subsequent limited availability of hardware and accessories;
  • The unplanned shift of software titles later into the fourth fiscal quarter, and in some cases, into fiscal 2021;
  • An 11% reduction in the store base, as part of the Company’s de-densification strategy, partially offset by recaptured sales through the transfer to neighboring locations and online
• Comparable store sales declined 24.6%
• Global E-Commerce sales increased 257% and are included in comparable store sales

Progress Toward Strategy:
Optimize the core business by improving efficiency and effectiveness across the organization:

• Delivered a $115.0 million reduction in SG&A in the third quarter and a $315.9 million reduction in the first nine months of fiscal 2020 from the comparable periods of fiscal 2019 through continued expense reduction initiatives;
• Continued to transform physical store presence through the ongoing market optimization and de-densification of the GameStop store base, closing 74 stores in the quarter and bringing the year-to-date closures to 462 while transferring sales to neighboring locations and on-line, and reducing store operating costs
• Maintained a strong balance sheet with:
  • $602.6 million of cash and restricted cash at quarter end and reduced borrowings under its asset-based revolving credit facility by $10.0 million to $25.0 million; and
  • A 33% decrease in inventory and a 38% decrease in accounts payable as compared to the third quarter of fiscal 2019
• Executed two sale leaseback transactions related to office buildings, contributing approximately $43.7 million towards total liquidity; and
• Subsequent to the end of the third fiscal quarter, the Company announced the voluntary early redemption of $125 million in principal amount of its 6.75% senior notes due 2021, on December 11, 2020. This voluntary early redemption covers approximately 63% of the outstanding Notes and reflects the Company’s strategy to strengthen and enhance its balance sheet, improve its debt profile and optimize its capital structure

Build a frictionless digital ecosystem to position GameStop as a digital-first omni-channel retailer:

• Delivered a 257% increase in global E-Commerce sales during the quarter to represent over 18% of total net sales and nearly 25% year to date.
• Leveraged improved fulfillment capabilities, including the initial roll-out of same-day delivery option to over 2,000 stores, enhancing customers’ shopping and delivery experience.
• Continued to enhance the customer experience by offering easier and more convenient options, including a personalized home page for website browsing and improved site navigation, post-purchase experience enhancements, the launch of a new mobile app featuring an improved shopping experience and a full suite of flexible payment options.

Additional Third Quarter Highlights:
(See reconciliation table of GAAP results to non-GAAP adjusted results in Schedule II and III of this press release.)

• Gross margin declined 320 bps from the prior year third quarter, with an increase in the mix of collectibles sales, a higher-margin product category, more than offset by the mix of hardware sales, which carry a lower gross margin, and an increase in industry-wide freight costs and credit card processing fees as a result of higher E-Commerce sales penetration
• SG&A was $360.4 million, down $115 million or 24.2% compared to $475.4 million in the prior year third quarter
• Adjusted SG&A was $359.7 million, a reduction of $100.0 million, or 21.8% from adjusted SG&A in the prior year third quarter
• Operating loss of ($63.0) million compared to operating loss of ($45.6) million in the prior year third quarter
• Income tax in the third quarter of fiscal 2020 was a benefit of $53.9 million driven by a change in the tax status of certain foreign entities and the impact of the CARES Act, including tax benefits associated with the availability of a five-year carryback period for certain current year tax losses, compared to income tax expense of $31.6 million in the prior year third quarter
• Net loss of ($18.8) million, or ($0.29) per diluted share, compared to net loss of ($83.4) million, or loss per share of ($1.02) per diluted share in the prior year third quarter
• Adjusted EBITDA of ($61.8) million compared to $7.7 million in the prior year third quarter
• Adjusted net loss from continuing operations of ($34.4) million or ($0.53) per diluted share, compared to adjusted net loss from continuing operations of ($40.2) million, or ($0.49) per diluted share in the prior year third quarter

Capital Allocation and Liquidity Update
As of October 31, 2020, the Company had $602.6 million in cash and restricted cash compared to $304.4 million in cash and restricted cash in the prior year third quarter. The Company reduced its outstanding borrowings under the asset based revolving credit facility to $25 million.

As of October 31, 2020, the Company had $269.5 million of short-term debt and $216.0 million of long-term debt on the balance sheet. Subsequent to quarter end, as previously announced on November 10, 2020, the Company announced the voluntary early redemption of $125 million in principal amount of its 6.75% senior notes due 2021, on December 11, 2020. This voluntary early redemption covers approximately 63% of the outstanding Notes. The voluntary early redemption is consistent with the Company’s strategy to strengthen and enhance its balance sheet, improve its debt profile, and optimize its capital structure.

As part of its strategies to create optimal financial flexibility and expand liquidity alternatives, the Company intends to file a shelf registration and prospectus supplement with the Securities and Exchange Commission today under which it may offer and sell, from time to time, shares of its Class A common stock in “at-the-market offerings.” Net proceeds from sales of shares under the “at-the-market” program, if any, would be used for working capital and general corporate purposes, which may include funding of the Company’s ongoing digital-first omni-channel growth strategy and expansion of its product and services offering. The timing and amount of sales of shares, if any, will depend on a variety of factors, including prevailing market conditions, the trading price of shares, and other factors as determined by the Company.

Jim Bell, GameStop’s chief financial officer, said, “As we continue to optimize our business model, we are shifting focus to execute the transformational components of our strategy that will position GameStop to be a leading omni-channel retailer for all things games and entertainment, which we believe will lead to sustained long-term profitable growth. Over the past 18 months, we have remained steadfast in focusing on creating a more efficient business model. These efforts, despite the impacts of a global pandemic, have led to a stronger balance sheet. We believe the shelf registration and associated at-the-market program, if we chose to use it, provide us further options to enhance our liquidity alternatives to support an efficient and successful execution of our transformational strategies.”

In respect of the at-the-market program, the Company intends to file a registration statement (including a prospectus) with the SEC for the offering of shares thereunder. Before you invest, you should read the prospectus in that registration statement and other documents the Company intends to file with the SEC for more complete information about the Company and the offering. After these documents are filed, you may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the company will arrange to send you the prospectus after filing if you request it by calling (817) 424-2001.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any security, nor shall there be any sale of the Company's Class A common stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Fiscal Fourth Quarter 2020 Outlook (13 weeks ending January 30, 2021)
The Company continues to focus on efforts that position it to manage through this unprecedented time, including maintaining its balance sheet strength, prioritizing the allocation of resources to areas of the business that produce strong cash flow, reducing expenses across the business, developing and expanding its digital strategy, and intensifying inventory discipline. Due to the uncertainty around the duration and evolving impact of COVID-19, the Company is continuing to suspend guidance, however it expects to realize positive comparable store sales results and profitability in the fiscal fourth quarter. For fiscal November 2020, comparable store sales increased 16.5% and total net sales were $791.1 million compared to $747.6 million in fiscal November 2019.

About GameStop.

GameStop Corp., a Fortune 500 company headquartered in Grapevine, Texas, is a digital-first omni-channel retailer, offering games and entertainment products in its over 5,000 stores and comprehensive e-Commerce properties across 10 countries. GameStop, through its family of brands offers the best selection of new and pre-owned video gaming consoles, accessories and video game titles, in both physical and digital formats. GameStop also offers fans a wide variety of POP! vinyl figures, collectibles, board games and more. Through GameStop’s unique buy-sell-trade program, gamers can trade in video game consoles, games, and accessories, as well as consumer electronics for cash or in-store credit. The company's consumer product network also includes www.gamestop.com and Game Informer® magazine, the world's leading print and digital video game publication.

General information about GameStop Corp. can be obtained at the Company’s corporate website. Follow @GameStop and @GameStopCorp on Twitter and find GameStop on Facebook at www.facebook.com/GameStop.