GameStop Corp. (NYSE: GME), the world’s largest multichannel video game retailer, today reported sales and earnings for the third quarter ended Oct. 27, 2012.
Third Quarter Results
Total global sales for the third quarter of 2012 were $1.77 billion compared to $1.95 billion in the prior year quarter, a decrease of 8.9%. Consolidated comparable store sales decreased 8.3%. Sales of new software, pre-owned software and new hardware declined during the quarter due to the longevity of the current console cycle and the difficult comparison of major new software titles released during the third quarter of 2012.
Sales in the Other category increased 31.1% during the quarter, primarily driven by new business channels. Digital receipts increased 31.8% to $127 million. Mobile sales, made up of tablet and pre-owned mobile products, were $43.2 million, on course to reach the company’s 2012 forecast of $150 to $200 million.
Excluding impairment charges, GameStop’s adjusted net earnings for the third quarter were $47.2 million compared to adjusted net earnings of $53.9 million in the prior year quarter. Adjusted diluted earnings per share were $0.38, exceeding the high-end of guidance by $0.02 per share.
Paul Raines, chief executive officer, stated, “Diligent operational efforts in a tough video game market as well as continued margin expansion of 200 basis points resulted in third quarter earnings exceeding expectations. We are now focused on delivering a successful holiday quarter driven by great titles, an unrivaled loyalty program, exciting new businesses and the Wii U launch.”
During the third quarter, GameStop recorded goodwill and other impairment charges of $678.8 million ($671.5 million, net of tax benefits) primarily as a result of finalizing a previously disclosed interim impairment test of the company’s goodwill and other intangible assets. This impairment test was required under ASC 350 of generally accepted accounting principles due to a temporary decline in the company’s stock price during the second quarter. The charges primarily relate to GameStop’s international reporting segments and are non-cash charges, which do not affect future operations, cash flows or liquidity position. A reconciliation of non-GAAP, or adjusted, net income to GAAP net income (loss) is included with this release (Schedule III).