GameStop (GME) 28 Mar 182017 Q4 Earnings call transcript

Please standby, we’re about to begin. Thank you, and welcome to GameStop’s Fourth Quarter Fiscal 2017 Earnings Conference Call. This conference call will include forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Any such statement should be considered in conjunction with cautionary statements in the earnings release and risk factors discussed in reports filed with the SEC. GameStop assumes no obligation to update any of these forward-looking statements or information. as information be financial earnings found earlier as other the discussed release and section today, can Investor call in well reconciliation regarding company’s measures non-GAAP on issued of A the the website. in the company’s

like would call the Mike turn company’s over ahead, Please go to sir. the CEO, I Now, to Mauler.

Chief base the during my and the leveraging leading - GameStop have legacy build future. XX I’m years and and to global evolving that the Brands. Officer; tremendous expect to placed afternoon, welcome forward for time you today firsthand to to call Dan call. XXXX. experienced associates continually Crawford, as is first time today company This and Technology full-year me you culture our I’ve innovative and and Officer; our GameStop’s and industry has our the look needs CFO; resourcefulness I earnings Chief Administrative as be Good meet us This honored thinking and on dynamics. And our in of and our Rob our taking discuss Kaufman, is Legal the changing an we our my by you customer of confidence GameStop support the to great SVP It’s address earnings join and Jason EVP into of fourth to to and With by that of a objectives Troy President CEO, fourth me we Directors quarter and Lloyd, Accounting on Board and with tremendous and company. the XXXX of Ellis, our quarter with appreciate results

addressing would like the friend, discuss Raines. the Paul results, by we Before a of good passing start to I

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results Now outlook and our for I like to for would our transition to XXXX. XXXX

fourth increased software by XX%, Our quarter revenues new sales driven collectibles. with hardware, strong new and

same-store drove provide drive ability XX% increase Our and in sales over a store customer sales. teams’ holiday service important exceptional period to the

driven Looking PSX like Xbox innovative at sales, X. the consoles hardware were by new Nintendo Pro the One Switch, and

World the new Duty: increased choice of as II we of customer game title be to for launches the Switch. strong software improved like purchase also Call holidays, Software Nintendo for as destination video as well to for and software War

a provide core customer and built-in can and engage trade advantage. Leveraging value associates, unique benefits to as up Our improvement, to Brands our variety said, expectations. collectibles includes as recent a credit we wide other benefits has This These of well business pre-owned our as expertise addressed, XXXX, down is our categories. was retailer. being of for our to that opportunities a categories. of loyalty businesses performed retailer - stores our year. investments across and reaping all any are provide business, in game in our in the continuing of pre-owned. In business But expansion GameStop video now prior areas products This where such With have improve over increased video XX% category. any like sales our unlike our and program, X% Technology game square the footage for a to other collectibles and we nearly the quarter, the compelling the

components near the new future. hardware the the but will Nintendo pre-owned ecosystem categories Nintendo performance console, natural into Given Switch in Switch their our particularly and softness, games in experienced expect around a believe software pre-owned and sales, we work strong way

can execution. sales we driver also The key the right trade-ins healthy on pre-owned of improve However, on products. are

near-term, social and the as a opportunity. trade in as done our games, to this we spend executing the communicate channels. Only So customers. must non-loyalty marketing are our both We customers other loyalty trade-in be increase marketing following. will This media, so with big CRM awareness to of through customers, increase well presents XX%

both and will releases. trade-in reservations, which compelling do promotions which more also We around increase need to through new trades - we will

make our effective more to focus we are need on increased with doing we of trades associates training and through and mind top Finally, that KPIs.

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the improvements will that team focus growth. to has retail in steps allow All of for potential long-term operational on the portfolio these

While due the to the in operating change, do for division difficult compensation XXXX. improvement we overlap be income AT&T in the first-half this will an to expect most

I Before to turn want thoughts to share the call over strategic near-term my of for Rob, you XXXX. tactical with areas focus I and and

imperatives. five We have key strategic

and taking will that acquisitions on we new we be fundamentals focus already First, investing fixing and the a of in the on have. businesses pause businesses

level we other can games, they know businesses drive opportunities I shareholder achieve, then these And We brands. growth. collectibles, technology have are can to profitable three explore businesses: once and video at core the operating that

Second, our key value proposition we with gamers need to hardcore this improve demographic. solidify to

transaction value reduce products customer every areas need average our more casual of expenses I include operating that online to families We believe base finally, the do also the to not consumers. by moms future. this is in relevant or improve in-store we a revenue and Fourth, customer, need need drive in and us expand attaching both and to other And operating for and fifth, services. we tremendous to profit. opportunity

shareholders. to of invest but of other these to as new accessories These as achieve drive just of but tactical products, not We cool release experience; wisely continue and plan collectibles, warranties our expand our performance. areas enhanced cheap, our greatest excellence money execution, and of our to benefits improve for follow: and without success, and to are returns the reservations, operational the increases are the appeal customer to will enhance shopability expansion will priorities in our forward. omnichannel remodels to central through drive spending e-sports in loyalty standard for a five, relevant trade-ins, to exclusive they license imperatives be will experience; wishes. program demographics; pre-owned improve the in be such the our high-end the two, The stores GameStop Driving hybrids major accessories tactics be One, to improve our three, continue success store circle to range going life and merchandise; sales, four, of frugal,

of drive Our and business, returns our the cash shareholders. solid to improve and growth profitability overarching is flows for our generate to goal performance strong improve

profits. expenditures, this growth. GameStop to the not we shareholders. cover Rob returning be In at next maintenance, to the operating extent neighboring focus be in In excess will on drive and systems detail. and store rationalization closing, remodels terms team to stores. excellence management will several store will profitability the over the more some focus expect improve operational to and capital can to continue cash new our There you of revenue can We to on committed remain quarters,

and share merchandise every and We the our test business discussed, the will we of for how years revise the we near-term we fresh way our we of I’ve partnerships will and from across strong assumption all all revisiting learnings together retain will we have and clear execute ahead. on our a aspect of areas lay our be thinking attract coming customers. of to that And will parts some foundation in quarters, how the as approach. focus we Meanwhile, may

call turn Now, XXXX outlook. on I more the over to would like for color our to and Rob financials

our taking you, a our Thank review outlook with then and start and you full-year today afternoon. for through fourth by share I’ll results, XXXX. of XXXX Good Mike. you quarter

guidance year share we sales coming Looking exceeded we and year back total per the the earnings annual at year, near on of range start international we quarter, for high-end U.S., the in provided the diluted sales guidance and total increased of issued increased a the and the the into maintained XX% In XX% comps adjusted delivered comp top delivered X%. the increase and sales. throughout increased line XX% the the year. perspective comps a From we

while delivered comps X%. sales. increase increased XXrd-week, international increased total XXXX, contained the approximately fiscal sales increased million X%, in X% a For XXXX which we $XXX in accounted nearly comps. for In a comps Fiscal and U.S., X%

contributor in Nintendo the XX% game This largely fourth for strong and a year. the was console growth largest video of hardware quarter for increase sales innovative comp the sales throughout was by and quarter success and the the driven in to Our our increase a drove the the Switch. business year, XX%

and throughout XX% quarter the increase of the for strong XXXX, Wars for X% Nintendo the over than growth seller best nearly an and the title selling both quarter, Call the Software Switch contributed was quarter XX% second year. for to II more best Star in Battlefront the was Duty sales was also of year. year. the increased the the titles were and while

nearly in the business and for performed expectations line in our pre-owned X% Our X% the with declining full-year. quarter

of pre-owned point in it to newness contributing important business Given relative our the yet Nintendo to a is Switch, not the it’s out way. meaningful that

transactions. we and year of consumers into each and we’ve playing in business see digital addition, sold longer content and fewer added a physical in-game take hardware as software pre-owned the games In advantage shift from games published to seen

down than were revenues brands, XX% due tech weaker to launch. to iPhone Moving a expected

For launch change, upgrade tech revenue to the weaker million, X% brands the impacted as $XXX cycle in and results. declined the year, slowdown iPhone compensation the the

the target increased Despite the we and sales fell $XXX of category for and delivered the just year. quarter XX% collectibles, For XX% $XXX year increase, the for the we sales $XXX to million for short the strong million million. of

we’ve gears first on to market and strategy to Going some gain growing this forward, believe margins. and vendors help can with in and We healthy our to business. procurements whenever are already distribution Shifting possible launches. improvements be more made exclusives non-exclusive these and gross enhancements improve working to

decline million in basis the pressure margins profit gross the The the decline billion away Gross year. the was and roughly year, of $X sales rate. Our to from XXXX margin hardware points the and to in gross in shift year for tech quarter The and declined quarter in our on also strength put pre-owned million fiscal in a margin XX% and XXX the the $XX points XXX business mix for contributed extraordinary profit XX.X% $XX due dollars. primarily increased XXrd-week for brands resulting basis rate. the to gross

basis pre-owned Our hardware promotional vendors the mix sales for the margins the well XX% the our and points. due activity. quarter year or quarter, were margins a and XXX as software of of Pre-owned as declined decline for cooperative to and funding, marketing

were executed our a XX pre-owned a more markets. markets, at activity promotional XX.X%, a the it in than the pre-owned but margin grew U.S., pre-owned year, decline declined, lower margin but sales For rate delivered We rate. which higher international sales, basis international points. margins In of

and see sales we drive past an software in increased promotional similar what hardware drove in experienced this Europe opportunities increase Going where activity year, we pre-owned to forward, sales. to

the find our understand be to more trade customer we better range and and expect Expect families business. us We’re among working pre-owned expand base we of activities going forward. hard balance and sales advertise us these evolving moms to and and on our to and to margin see hardware to both mid-XXs because more promotional right can come software, types do between from awareness low-XXs and Therefore, help margin this that.

For the drive our We inventory. sales in for collectibles, quarter effort to holiday gross the margin executed was strategically full-year. the targeted XX.X% and an XX.X% season excess clear and promotions for in

continue customer of timely believe frequent and assortments a better on to introduce allow markdown property lifecycle business. more new We We our slow-moving expertise the refining management a we collectibles we buildup by intellectual the and inventory. By cadence. for These should going and our optimize improve leadership compelling this activities various across team product learn about types leveraging our us with look prevent learning to providing forward, to more these product of experience. exciting can the basis, and and

margins we as continue take we range high-XXs and store from low-XXs to this peak from sale learn, as in clearance the advantage may events. expect traffic category to execute However, quarter-to-quarter we to of to

the last SG&A, to increased a and the was $XX increase, the increase in million $XX excluding million, in the the quarter charges. excluding fourth fiscal operations in moving XXXX for or driven million foreign year. $XXX XX.X% charges sales. quarter, for XX.X% currency Now to roughly the million, The of of million QX year. $XX $XX remaining in increase for $XX the the X% was for accounted percentage for The SG&A, XX% for while nearly by of of full-year. quarter sales XXrd-week increase and accounted the SG&A million for or quarter compared X% as

tech XX.X% collectibles charges last $XX of in excluding million The sales of increase full-year, by percentage was attributable the $XX was the for as full-year, SG&A, to the for brands. was total growth in year. increase strong our in million For the including to increase SG&A sales, store the driven remaining XX.X% increase business. the a count compared

$XXX.X we million tech we the business charges With incurred brands closed the costs asset of During effect incurred and fourth million an be to million in-store the other additional a regards $XX.X to assets assets in Technology quarter, The million stores on base closure-related pre-tax intangible charges: store $XX.X and fourth on quarter. profitability. normal $X.X tech footprint, in the portfolio a after-tax million a was impairments million. of basis impaired brands in $XX.X Brands we driving million in the of for in $X.X charges. due video stores and XX and and game tax $XXX.X most divestiture store in the activity division rationalization $XX.X the focus in to the goodwill as total the division; store We following will performance million continue as capable

for $XX of overall decrease quarter were stores the related earnings brands pre-owned to year We company in for quarter XXXX. in $XX quarter year. the in as some two earnings costs a will $XX for quarter will the additional see On for the of of million tech the of million million for million gross operating The million adjusted the declined to the and decline first profit $X operating in total and $XX basis, $XX a the closures and store year. contributors the million underperforming some biggest decline an close and

U.S. for the our previously of video expectations. operations on following for our was a X,XXX year, disclosed Act. per the foreign XXX game were adjusted video adjusted the an closed were which of and rate share of Tax in world, in Reform to new XX.X% in $X.XX. tax stores the planning in Our the the and store Full-year one-month all effective pre-tax net quarter portfolio efforts with with XXXX, our and XX.X% We stores the around the We line earnings of ending internationally. impact tax to game changes made year U.S. X,XXX due earnings certain

cash million returned working the XXXX, with net opened The stores, collectible impact We million, expected, and stores. stores. have AT&T ending with now dividends $XXX XX January XXXX, In of of full-year sold our Simply shareholders XX in During free XX significant XXrd-week the clearing than XXX. Mac Technology outstanding another closed of year, XX during checks. capital and management. in we the the flow and Brands we we stores $XXX of stores year-end focus given to Cricket the year and And was on generated of timing payments of a less X,XXX actual

Our year-end was XXXX. million. for cash balance Shifting to $XXX outlook our

our retail and on to keeping continuing of year changes, CEO and Given focus guidance of high including and very all as appointment assess we our management our the desire businesses level annual recent are a performance. to at his Mike’s guide operations, towards this fundamentals

fiscal range down flat. full-year to forecasted X% down For same-store from are with revenues X%, down and between XXXX, to ranging sales X%

game growth the in the of to huge success collectibles expect single We the overlap while the the business Switch. business, of expected mid due to digits decline is video

As a until change reminder, a will compensation we tough be the AT&T. first tech the quarter for brands anniversary with comparison

the we to tech brands year, operating expect For earnings improve.

XXXX. We’re a to XX% of due rate rate U.S. compared in effective is in the rate an to approximately enacted tax forecasting XX.X% XXXX, lower to tax reform adjusted The tax of in XX%

due However, of rate impact and mix than our our to which higher the overall jurisdictions the in in taxes. the is operate U.S. we earnings rate state of new federal the

rate. the XXXX, million. per XXXX year fiscal fiscal average guidance in to for and anticipate we guidance Dead a the Absent Black out We’re last than shares for share assuming of expected fiscal in Ops vastly has IV to guiding of $X.XX per back-half play of of our XXXX. accounted $X.XX very We for outstanding Switch Red tax for of II. in The due EPS the the will approximately the sales Call stronger $XXX.X launch XXrd-week is strength higher in the Redemption The the year, first the $X share XXXX Duty: the full-year diluted quarter to XXXX, of earning new impact the of performance comparable of with and huge success XXrd-week titles first-half different due title XXXX. than slate the XXXX of to

in fiscal that. of XX% that of timing earnings annual anticipate in compared prior the these and and XXXX of events, XX% the our XX% two first-half, years for to we between will come Given the XX% to each

associated the some given changes are executive recent be the results which our first earnings. anticipate will charges the approximately in million, decline projected flow include $XXX to with Our agreements. of cash in tied We XXXX quarter free to for fiscal team, of employment terms

We $XXX when rationalize expect be footprint to video store to we capital expenditures portfolio million between similar we profitability sense. the individual makes sales XXXX $XXX continue the will assess to a and perspective, From and transfer in to game opportunity store million as XXXX. store

approved capital our share quarterly consistent rate in XXXX. at paid at recently Board allocation, Looking dividend with dividend per our a quarterly $X.XX

maintaining around we decision-making returns shareholder commitment robust capital both to in to our our will balance capital prioritize flexible Given continue a allocation. and sheet, structure and

part $XXX provides. looking top approximately and forward senior were line longer-term million proceeds pleased We and in XXXX we and that XXXX, allocation of to sheet balance our $XX the also refinance that closing, million with opportunity our our results anticipate notes maturing as will we XXXX In financing our in strategy balances. XXXX of capital cash are of management, through

that our profits. the moderator now we be focus excellence it operational as questions. operating I’ll for over enhance to to we continue can turn and months, in improve the optimistic coming business on We

come first Sebastian Our from will Robert Colin question Instructions] Baird. with [Operator W.

questions and taking you. my Mike, to for glad have Thanks

Thank you.

this in your some see you the more So you areas on wonder commentary gross then I And the specific on that opportunity over I if for could go into margins guess, excellence, operational the guess, off, detail, of is the identify Rob, focus I or on maybe secondly, and company of into first - for show maybe improvement pre-owned. year? that

decline one focus or greater relative follow-up. that on promotion there. margin more and than talked advertising assume to also expected?. about And Thanks. in the have better gross I is I You

when our on drove some we and We proposition be our sell. moms strategy, Okay. stores and to of we our to that three year’s focusing Yes, more our the within customer in better expand we type need talked what of all products of to about for fundamentals of the develop have value demographics. we at of terms results when businesses, the we and need we example. and change and stretch a cool that And last families, shopability the range we - to to of opportunities need expand merchandise relevant

in ecosystem you bring products along it’s our we more - better have customers these do job we program, that into market focused and on now new other that focused when with them them. get value for So that, these GameStop loyalty at And can an video the the can demographics. that we we when to games opportunity a and once to proposition from new right there’s customer very us on collectibles tied

a number we’re amazing penetration. of side, pre-owned of the trade mentioned increasing games. actually trade-in I on are our focused terms in XX% customers of things It’s On like that

stores, to and KPIs the in market mind we make to we make which pre-owned - of making training that We’d do the with so trading omnichannel to in also making business and got them experience. like are improve it trades, better have sure in our has happen. we’ve we’ve aren’t investments associates, customers more sales And games and to those got sales top and to a our right on

around circle can store So the well life online, drive channels order as performance. or it’s it store house. that of And have your and in in finally, sent online, different as we to up more pick really like order sales

a making customers transaction accessories. new an And increasing expand sales sure marketing. our to have to that do release value trade visible attach in we a more pre-owned through can that drive the stores average warranties new get things finally, in into there’s better to that and we and of demographic increases promotions and drive tied we’re think, our number that Once making I reservations these rate.

are on. those some So would examples to that want of the focus just areas we

you buy terms trades traditionally gross part power to that their I reached only not that will bring the in One, two, expanded of activity to of and pre-owned, customers designed the then that get talked have customer trades. marketing base how just is we’ll the what Mike think, existing do we see that, but in them Colin, and participating the of of that aware more about we moms do the them? how margin promotional pre-owned, get we take efforts And through families fact in on the our incent, we’ve process.

So more we be as promotional do to expect well.

in collectibles would appreciated? Thank my rationalization. and to of any store wonder, of the the of follow-up, foresee for like change vision example, you you. of terms games. accelerate Europe to other half you proportionate not pace guess details remainder a that, And stores, the the If I be the looking the having if sort since within in you’re a to format is, Thanks. I store the stores in have some there’s planning

lot that or our really core games stores collectibles. feedback of purchase little Sure. hybrids can for a doesn’t appropriate our Converting a video of somebody gotten and outside confusing to model, normally we’ve disorganized new or the the be stores gamers where that

Australia, about is past, more that And be friendly more in so Europe, a what and the demographic. of to these we’ve talked to in stores in convert open, lot we done organized,

thing same the the doing U.S. at looking we’re in so And

markets. key - only our U.S., U.S., or outside in it’s of stores. street XX% In And the of stores of a that of stores healthy strip are the XX% about between different the there’s U.S. of execution mall-based our Outside are malls difference reverse. are the stores the about and the Now mall-based.

of our XX% about malls. actually strip So are stores

- on then an difference a traffic window and In to do And in same, I collectibles be of give with different. to and the into I the the strategy store. a is And mall you the impact customer that example, that’s store. front, it’s immediate and but the an trying has by in base if strip of the we’re have just go execution it store a that is mall the walking what so to the And change same. the mall, put that destination signage more

So better value that a we’ve figure out got customers to to way to proposition. these have communicate we a new

products. new into it’s our It’s have We relevant, ecosystem. and cool them get

ways of And then be different a will terms spring underway doing store that, different concept in look this the - the number of so based design And expanding in we’ll in and works. that, there’s of at on those both to marketing. that tests invest that

a be candidate the Colin, years working six let for to closure. stores. program, power using me other address operating stores we that, to $XX,XXX is we of we close of store a closures were in about of, nearby moved about found transfer What to sales through just actively the level stores pace max the at of of is profitability call it,

would to as the and of compelling look to close on store not percentage actually we’re stores of And closing that. economics same the we remarkably move and hard or we do have in that rough just profitability store through $XX,XXX, as to number maintained up to profitability drift well, the it’s below anything to stores. years $XX,XXX, we’d at that finding that So and the stores base

to those the so. past. an see on So don’t do where annual profitable close seen in will at the opportunities we level is just continue that a We as basis a great that exist we’ve marginally stores, to

Thanks, Great. guys.

next Our Nagel will Oppenheimer. Brian from question with come

afternoon. good Hi,

Well, Brian.

new your on Mike. role, Congratulations

Thank you.

questions. I’ve a of So couple got

for and you actually in Can this means, made implications what change both that near to Thanks. regard change go you brands and mentioned to with the as off, longer-term you the tech change AT&T? the First compensation the just the a and structure. the here, that little business in given detail more

just I I’ll really say good Sure. off is partner us. a for The AT&T to start again. with, it want

to we’re closely so plan, it’s business. I that Jason, expand. and able We like have confident, goals we I them take that a would think, area. so win-win. a a maybe, with working some And be like profitable And I’m compensation They have from to of together. to make that kind could the change And great - to tie have it we’re there. relationship, would you both improvements to in obviously going us We

Yes.

category, was we entertainment changes some year, Brian, compensation, of our sales And some move intended made stores. last made in more to didn’t macro we retail compensation the well investments. would they’ve which have to honestly, how So large it is towards traction get quite hoped. that the And category, or the think like us obviously for I whether AT&T they the entertainment activating in execution sales reward where through customers

we’re the with table back at So AT&T.

As Mike Obviously, the a distribution with has year. want to the exception returns historically this indicated, be last they healthy it really to has us potential has business provide great of partner.

we think we’re the get with at that results. produce to something that we’re them going will we’re longer-term optimistic table that and So

do So, timing or of these is negotiations? you see there Jason, any idea with anything regard to

XXXX would I we say, happen and we’re hopeful active, in will Brian, they’re than something happen and expect it’ll Yes, later. that that sooner

the us. us AT&T quarter second-half if the we’ll terms will comp, the think, but for can reach get with then I that As mentioned, Rob the think back first side we to will really reasonable good then for be to I toughest look of some

pre-owned you’d question Got some Rob, efforts Europe business it. in prepared - guess, And success mentioned your is you in the about forth in some put were comments, talking my that there. second you I

you may bit also of how any to the could and around elaborate can translate little that on more in do a in States those initiatives? timing United you what maybe So that

part of Sony in much them that to in the we helped party the hardware side to targeted ran on spring share I’d inventory stocked to were and funded either than did say Pro. it pre-owned season. what get PSX a in pretty largest our holiday PSX us highly successful. an PSX that ran anticipated while. and well quite for promotions thing in on they were the was those successful PSX We the Those We Europe, that again, margins highly, kept our more kind promo, and on in it drive saw some were around we So ran help by protect trading they the we very old the market

Sony a of were outer focused with little both we GameStop test, the pleased were were and and where the limits on that. put think, again, more I we

There we as in turn what the that back seeing us. promotion, we’re different pace U.S. the in software year order the margin the for changed to was So pace than a the that of on that in translated well. it was for the hardware investment in bit across results drive business is as made an to look it the That but Europe, was dynamics

same old for that look markets recognizing we’ve employ been inside as and been overall. we’re so us hasn’t running pre-owned in other to seen And as we how U.S. well playbook the that going working declines the doing just that can we’ve in

about. So that’s really we’re what talking

other more Got was Would platforms it installed included With and the - be phenomena it to see a this similar guess, could - here rate if always to time attachment look you. to sales get Switch, slip you one just hardware? out and basically we have the better big over better I where a that because of then it. Switch, Should base it’s we in. continues And you Thank this how big driver Switch evolve? the switch regard as in a XXXX. I

we the saw different say, I in question with that’s fair mean, past. know this that I I’d kind Yes, is what with definitely Nintendo. a EU. think platform happened of a whole we

to software. visibility have the We

of all as as lot a hardware year they and sales, was year had as the software, for tremendous that Zelda as well last games between well software. the a really Mario Odyssey hardware So and drove

have I many looks this which strong. yet, at we very, think year when announced very of also titles the slate this look been year of

slate for the increasing I on really software have don’t XXXX, strong hardware the it past continue think, out rate. we’ll additional at drive should We base least, So XXXX way. play visibility for installed see that but to for yet, XXXX

you. Thank it. Got

Our will Nagle Bank [Operator America from Curtis Lynch. Instructions] come of with next question Merrill

very Thanks much question. for taking the Great.

this going way think, guess, bit be implies SG&A that the the year, guys to I about about looking right at trends segments comments fairly dollar So do on it year? could to it? growth minimal. you I of the think think what I margin are between that this Is Just SG&A the would possible kind first of some recent gross if one, a and your talk balance little

strategy. And was this Well, on I we’ve is the certainly, and we the year. fundamentals start with focusing of That additional one focus our of of that - done the I reduction about drivers think, see already restructuring part SG&A basics. of we’ll some talked the

One of costs. make fundamentals is to the sure controlling that you’re reducing and

part that our strategy. be And will so important of an

that maybe in you little think, detail. talk a I Rob, to more probably could

Yes.

dollars to level. would decline Obviously, that talked my raw XXrd-week and component there, XXrd-week. of revenues look that I gross from the is you stated year-over-year, margin we the just comps. the million about lower a forecasted But $XX at amount that in if was a script contribute So profit in

a that that, we have SG&A well. would related do But to see margin. through in we and would we decline also XXrd-week, SG&A gross see decline would some as expect So in to see focus expect we

sales XQ? Got just as week, Extra where it. then follow-up. segment for trend a did And new

to number don’t that me. you of that. in going We’re to have to front I on get back have

pop more, And like or Okay. were tables looks pretty up it I’ll both in more balance. significantly just maybe and inventory one less just

Just curious what was on there? going

increase Well, saw inventory in the that, a in to we year. had sizable side the large sales degree was pretty the for our what you equation a collectible of

increase collectibles in that sales inventory growth. So there was an support the to

We support inventory sales also well. increase had as the to in and hardware software

basically the was. that in In inventory believe I terms payable, than proportion accounts the greater up of was

shorter respect end purchases Some get of of terms had the on hardware. well the We timing the in were stock of couple with at consoles with to payment pretty on of and payable the a the hardware generally do accounts we year. to

thanks Okay, much. very

question Group. Joe with Advisory Our next from comes Feldman Telsey

the taking for Thanks guys. question. afternoon, Good Hi.

Sure.

Do know in the space I store. year-over-year, wanted you been to sense the if business, mentioned guess, have on that aggregate? ask, you and about without much within I a the think you guys collectibles space how stores expanded expanding I have of a

to the stores, in of a think, on, Europe, don’t terms you we’ll I would I in of we more is than our know few increases, a have quite to took XX% back I maybe model. something XX-XX to get - We’re believe that exact amount space of

just think that. out starting the with really U.S., we’re I in

something while and continuing did aggressive as to that’s year. expansion, we’re so still this there look at dosome it we And for wasn’t

increase from - about end XXXX the overall believe the about linear of to feet at I on in XXXX in came X average about at an across the portfolio.

it. Got

question, driving out. upcoming stay Okay, some gives also that maybe of wanted a business that if certain understand in know, confidence minute. said? there’s you the guys collectibles products, a And and I What Thanks. a around any to share type you thank you. seek And to also another on categories maybe lot I there? just XXXX like different two, there’s theme for the in any licenses - the of you can then licenses then any But sell category within is there or people trend and of collectibles, the that kind

Sure.

think, the growth strong a video is Overwatch I licenses. good very that. with we’re some seeing example of game really of

seeing We’re Fortnite. with strong growth

and think merchandise well really, license did blockbuster the us The globally. well. Panther a quite did Black really for I movie was

watch. of carry. are the exclusives the a area of almost other and to most It’s they a other they when Funko with of retailers from lot release. on say, hard category drive good categories our we’re a been like pre-sell able it those focus Pop! perspective Funko I’d apparel. terms get we’ve category, traffic to In that very new is Funko - working don’t And Vinyls and popular is

very scratching for dedicated now just have they of and someone sizes along to well focus what we’ve that couple our a the apparel. besides really now just focus with female past the We us. done on to that. surface have on the in on and strategy opened And moms and We’re families we’ve stores hardcore, with kids done very,

best. the categories now would right be I would doing the they’re those say, So two

luck. That’s you great. and Thank good

This Rob… is

yes. Oh,

you, Thank a for X% is the the in the front at have quarter, guidance the in Curtis me. didn’t to mid have in fourth placed been down it’s which asked, of the the In we of Joe. year. been now with would Ex single-digit year, gave question beginning me, line data that response I XXrd-week, in X% front pre-owned of

[Operator Instructions]

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conference does participation. Thank our today. That conclude you your for for