GameStop (GME) stock Q4 2020 earnings results show strengthened balance sheet, e-commerce growth
GameStop's (GME) Q4 2020 earnings report is now live.
GameStop’s (GME) Q4 2020 earnings results are out, giving us a look at just how well GameStop did in the final quarter of its previous fiscal year.
One of the first things noted in the report is an increase of net sales, up to $2.122 billion compared to $2.194 billion in the fourth quarter of 2019. GameStop also reported that it had seen a 175 percent increase in e-commerce sales during the fourth quarter, representing 34 percent of the net sales for the fiscal 2020 fourth quarter. Previously, e-commerce sales had only accounted for 12 percent of the net sales in the 2019 fourth quarter.
The following info is taken directly from the Q4 2020 earnings report.
Fiscal 2020 Overview
- Comparable store sales decreased 9.5%;
- Net sales were $5.090 billion compared to $6.466 billion in fiscal 2019, reflecting an operating environment that included the impact of operating during the wind-down of the seven-year-old prior console cycle, a 12% decrease in the store base due to the Company’s strategic de-densification efforts, which was partially offset by recaptured sales via nearby stores and E-commerce, and a significant reduction in global store operating days as a result of temporary store closures in response to the COVID-19 pandemic at various times throughout the year;
- Global E-Commerce sales (included in comparable stores sales) increased 191% increase for the fiscal year and represented nearly 30% of total net sales;
- Gross margin was 24.7%, a decline of 480 basis points compared to the prior year primarily driven by the expected mix shift toward lower margin console sales in response to the launch of generation 9 consoles, increased freight and credit card fees associated with the shift to E-Commerce sales and a broader promotional stance;
- Selling, general and administrative expenses were $1.514 billion compared to $1.923 billion from the prior year, a reduction of $408.5 million, or 21.2% from the prior fiscal year;
- Income tax in fiscal 2020 was a benefit of $55.3 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 $37.6 million in the prior fiscal year;
- Net loss of ($215.3) million, or ($3.31) per diluted share compared to net loss of ($470.9) million, or ($5.38) per diluted share in the prior fiscal year. Adjusted net loss of ($138.8) million or ($2.14) per diluted share compared to adjusted net income of $19.1 million or $0.22 per diluted share in fiscal 2019, and;
Executed on financial and operational initiatives
- Delivered a $408.5 million, or a 21.2% reduction in SG&A expense in fiscal 2020 compared to fiscal 2019, primarily driven by continued cost optimization initiatives
- Strategically de-densified the Company’s store base by closing a net 693 stores in fiscal 2020 while transferring sales to online platforms and neighboring locations;
- Achieved 30% decrease in inventory at fiscal year-end, leading to annualized inventory turns of 5.9x as compared to 4.4x in the prior year, and a 10% decrease in accounts payable at fiscal year-end as compared to fiscal 2019.
- Ended fiscal 2020 with $635 million of cash and restricted cash;
- Reduced overall debt by $57 million, including a $125 million voluntary redemption of the Company’s 6.75% senior notes due 2021;
- Completed exchange offer and consent solicitation for $216.4 million of unsecured notes;
- Completed five sale leaseback transactions related to office buildings and the sale of a corporate travel asset, contributing approximately $95.5 million towards total liquidity, and;
- Completed the wind down of operations in Denmark, Finland, Norway and Sweden.
Corporate Update
During the fiscal 2020 fourth quarter, the Company added three new members – Alan Attal, Ryan Cohen and Jim Grube – to its Board of Directors (the “Board”). The Board subsequently formed a Strategic Planning and Capital Allocation Committee (the “Committee”) to identify initiatives that can further accelerate the Company’s transformation. The Committee is comprised of Mr. Attal, Mr. Cohen, and Kurt Wolf, with Mr. Cohen serving as Chairperson. Since the Committee’s formation in late January 2020, the Company has appointed a Chief Technology Officer and several other executives with experience in E-Commerce, customer care and technology. In March 2021, the Company appointed Jenna Owens as its Chief Operating Officer. Ms. Owens has spent the majority of the past decade in executive roles at Amazon and Google.
The Company is continuing to actively pursue senior talent with E-Commerce, retail and technology experience in order to transform the business over the long-term. In the near-term, the Company is continuing to position its brick-and-mortar footprint and digital assets to capitalize on the emerging console cycle and additional gaming opportunities.
Starting with the first quarter of fiscal 2021, the Company intends to modify its method of communicating its quarterly financial results. These communications will include a press release with the required disclosures and will be accompanied by a presentation to include detailed supplemental financial disclosures, financial statements and other operational highlights, accessible via the Company’s Investor Relations home page
You can view the full earnings release on the GameStop investor relations website. GameStop will also hold a conference call with company management at 5 p.m. EDT today. You can head over to our previous article to learn more about the conference call and even listen in.
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