GameStop (GME) 8 Dec 202020 Q3 Earnings call transcript

Greetings, and welcome to the GameStop Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will file the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Eric Cerny, Investor Relations. Mr. you, Thank Cerny.

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stabilize, and GameStop. key trajectory The third pivot in transform point our fiscal optimize to a represents quarter

will significant rapid optimizing about industry us operations its in our continues enable strides are that to growth. we plan our made excited core are long-term create as and executing have value We the transformational and stabilizing

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time and the and George. of console third Good then take XXXX to success quarter. into approaching I’d you fourth new this insights the share results, afternoon some you our the you, we're through Thank I'll quarter launch like video how everyone. walk fiscal

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third fiscal turn me Let review the the quarter. of

the titles we sales quarter in video fourth final line many performance As mobility shift as some George in drove console quarter third Further, through mentioned, was the retail X our realized transition year and into October of COVID-XX consumer XXXX. top as which Generation spike software case even expected the softness this included of game as we the cycle, quarter down. of

third fewer for $X both sale XXX our and countries, global were below of de-densification. XXXX. businesses mobility combination the was through customer store billion operating comparable and sales, of consolidated our most of quarter lower was exit XX.X% operating the decline the the unprofitable stores the of impact negative and to strategy of part fleet impact our third of store XX.X% retail through as optimize Our foreclosures a The quarter

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in global our the were basis down gross more software XX.X%, XXX points third margins fiscal last year. overall led Our from quarter XX.X

expenses management year-to-date third versus Now or year. the the expense to over our ahead SG&A of third at reached end a were reported million million turning XXX expectations. XXX in the million of XXX reductions and decline total XX% SG&A of last SG&A cost reflecting quarter objectives, our expenses approximately our reported The quarter

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in of operations come normalized we centers. future of return as more some distribution these to our expect we variable quarters, While stores and back costs

we've We result more loss end, of We year it also of $XX doubled carry certain of XX.X tax initiative, XXXX. status the Income original of the focused these expense benefit have in quarter quarter. in million, prior was of to part entities a foreign operational the of that on Act, by annual in third as a which of the expect the million period actions, a and driven in This impact certain the the compares permanent an this steadfastly change tax Reboot operating for for reductions benefit CARES to than began year third the efficiencies a we in tax a million year elected reported in income additional year five $XX.X To an back which XX.X expense as an prior loss current are compared to million further took lot the third we operating quarter. losses. tax create we of tax future. reductions cost

loss, related assets share share, the was to effective sale share of of loss XXXX $XX.X quarter. the $X.XX reported net our Our or quarter fiscal $X.XX loss to transactions in $X.XX tax with adjusted rate $XX.X million loss compared diluted per for XX.X%. million, of quarter. third prior a XX.X or the a loss sale share, million, per leaseback $X.XX the was Adjusted excluding year compared loss of net to a diluted gain a on the XX.X or diluted On diluted per for basis, net third million net per in loss of

global to our quarter, third optimizing During and focus fleet continue identifying certain we strategically the store markets. on

the stores quarter compared of last to total the net a closed total stores quarter with the bringing fewer we XXX end year. or XXX third of quarter, operated X,XXX to the of our end year-to-date. the At we closures XX For

close began worldwide continue strategy Given and on experience, are stores in we XXX year and X,XXX total in track the fiscal to we over sales part this XXXX. our since to this strong stores nearly of we rates transfer profit

to Importantly, outlay little we're so. to completing these closures no do generally with capital

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consistent up At During to outstanding sheet. down to stock. end, notes. some and to by optional on established based of and Separately the related announced and of we of the support quarter, amount in various capital focus the balance is also filed we term spending XX, redemption on our vendor continue redemption and $XX with programs. of senior is asset due redemption of credit today, year, place had the enhance a third term for our $XXX debt $XX and had covers sheet, near shelf optimize our expenditures to depth X.XX% of our the under maintenance reduced statement $XXX debt invest of December the and additional borrowings improve $XX.X term voluntary by the end strengthen approximately we sell of a $XX value outstanding on notes program common projects market short CapExfor third men balance anticipate In The capital profile we structure. of $XX long million facility the which in the to actions Subsequent quarter, The that about million, our million the to our outstanding. and approximately million take million high still we'll revolving the principal million early offer XXXX at XXXX. early offset $XXX will XX% strategic quarter, 'XX we've our voluntary and $XXX.X we million to registration third million quarter capital million

noted I have we our strategic unknown to with this sheet pleased strengthen potential sheet continue several strength balance through have And execute or the than objectives. we're navigate on extremely As we sufficient more liquidity endeavors, achieved as believe pandemic advance effects. and extended times results our as these year, to and balance well any to

timing the depend amount and of program, if prevailing to factors, such, will and As sales price of need of including shares under variety conditions, any we trading other a market of the determine. the shares, on factors

a the accelerate to increasing the gives impacts the further with elevate from while around disruption optionality bolster us expand pragmatic pandemic to flexibility to potential as provides sheet balance position and at as opportunities increase ability the maximum minimal further initiating strategies, which our our speed transformational flexibility this liquidity we world. such any program our and strategy, ensuring leverage omni-channel However, and us further matter

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seen sales so quarter, performance with expect the the far our few of quite in launch, quarters. not fourth strength and the profitability growth in have Given something we strong console we a

the As in sales and despite of Canada Europe most throughout of XX.X%, George of mentioned, to increased store comparable foreclosures November impact November. part

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continuing result a the we COVID-XX, of e-commerce grew XXX% start strong in guidance. uncertainty sales November year. month impact suspend quarter, are same the the the fourth around the versus Despite evolving given year-over-year to As last

the have be we COVID-XX mentioned, Europe to seen international we store likely closures levels operations, of fluid due very As things U.S., varying particularly our could closures and across in store of rest temporary mind remain exclude into as the heading and comparable permanent store closures the the XX or the due contiguous close to December Keep sales more in impact pandemic. locations January. of days in and

our how I actions. a our I on and strategy to especially we're estate de-densification optimize efforts real over-stored wanted fleet, approaching markets further conclude, Before and to elaborate further little

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generated and you quarter holiday, our are We launches. summary, we're for by our objectives will excitement during the call. fiscal by and update earnings and further year-end a on In console fourth off buzz associates the great these energized conference to start

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Thank you.

first session. comes Please Our question. We [Operator with our Jefferies. your Stephanie Instructions] will now proceed having from Wissink question question-and-answer be with

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you. Thank

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see So, Day very that on we're being Day. sales to in closed decision and despite of on to being glad close Thanksgiving Thanksgiving XX.X% comfortable

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So, that's real it. and we I point George made, the been did, think strides some against we've making

Thanks.

helpful. In release, around some providing in growth that's So the there's to XXXX. reference commentary

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year. It's absolutely referencing sales volumes next

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Thank you.

Bank Please Reuter with Our next question. America. William from of question with comes proceed your

just two had quick ones. I Hi,

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make it that expectations. in you is if yes, line change, our So with

corporate consider to Would general I program? that under Okay. terms stocks you the shelf, And new saw issuing debt of then, repay in that purposes. you mentioned

immune that see you And not back and the sheet. here be same term 'XX, will by over to of reduced we're million is going and debt -- this the have long is they'll XX including, month a And coming intent. in to to world, intent plus the execute minus. to balance The over timeframe, March debt absolutely on continue the of to ongoing the impacts There in to timeframe, $XXX roughly this marketplace of lot pandemic, bolstered optimize in XXXX optionality regard, even work of going or that flexibility that's that we've early today, it's own all same the Friday million, look, strengthen $XXX long-term our strategies cases we unknowns right. until our in if on as we're simply businesses, have done, not our period. levels go our respect and that, that across No, with flex

over shareholders. to returned $XXX also We million

pragmatic helps flexibility to goal and run the focus to look, continue flexibility. is maintain that business Hopefully on do think, and have we our the running make I anything sure you. be business, that the than So intention optimizing capital but we with to no also very other

absolutely. need need don't we Certainly, Yes, We it. don't it.

notes. mentioned, And of March remaining of the voluntary first million the Friday's I early last 'XX as of redemption $XXX

pass I'll Thanks Great, to others. so much.

Thank you.

Thank you.

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

prior your thoughts backlog single heavy allocation every very I there out you plant We still, With what your I compare sold did period? and there's are got. rest produce still cycles? of regard you assume how come that that to know unit said mean, the and a to more. through the allocation presumably the Sony consoles, they on Is has

any that? can share So you thoughts on

Yes.

don't that Joe, I unbelievable, demand of end insight. mentioned. the you think been we has see And that any as

competitive I calls say of answer is So with want certainly, between mentioned I demand and it. pieces these I've from the fabulous has set think terrific allocation on past Any OEMs this of the get the direct console themselves. always to are changed is really we will more. we the The technology. launches for evolution that consumer

but allocations what a about the which you playing look So winning we're that tells meaningfully, our time well. objective we're was last around, bit versus like and

we and in all think I part point attach one along premise of our a us, area for differentiation it's of differently. So is been

point a a expect we terms you it of when accessories, and level and So, us look to we recognized, for in party differentiating seen allocation. and we at be that's for differently attached some software, going of first forward reward that been have

some And the million, just then I fourth that cash its to presumably, but you more regard question in another XXX balance, yes, quarter. mean, I of generated the with restricted, know

or understand are with thinking pandemic. cycle through rough. the guess, But I you about to getting months couple we're allocation of how I I or the so next cash say, Let's to we've are to stock going that. more cash this be you point? talked back coming return buy at year, know were usage to are the hoping this in going people that

think should that we how curious forward? about going I'm guess I So

a allocation, like think what certainly we're Thanks, ultimately, right with we our job Joe. that capital mean, debt? the the rest XXXX every The ultimately March for said, short the of returned investment proven year level in that, XX. get we'll I business. of is growth the and it continue future down off then means And these a answer of rapid We the done is, of optimum That's transformation of after capitalization that, outside find to is to which and paying accelerating it one business also think point, bring to share, the capital do last the And the profitability. return investments well the return of of that approaching is over in we’ll in as first starts of if the to the more those I fine the I nothing's table. those fashion is which shareholders, that. as again, consideration on And million balance $XXX table. balance always to do we've

looking find the capital of allocation. always are We balance to optimum

And few that obvious timelines exact you by a nor we are, encouraged now. don't And know means more the does add obviously a or all environment know but point. months don't underlying what just at impact see to like protocols kind matters we We're of the ahead. certainly vaccine, for of this just right anybody the we more

the insight to have we're guarded going future. be is is no there's future for end look particular we into that something the be to with about something So indefinite at we yet. This dealing date

luck this holiday Thanks with season. and good

you. Thank

Suisse. from question. Credit comes with question next with Please Our your Sigman Seth proceed

language follow And the I to on to commentary. the QX want confirm I wanted here. up just

confirm, as you I just release year-over-year the to in growth. profitability sales growth talked well? So about positive guiding are you to want year-over-year

anything, I that. was been and specific comment straightforward fourth to profitability we've on the we're to think again, guiding quarter. to growth clear, not it's, Again pretty not guiding be just And We're in to anything. the

saying Your grow growth, sales confirm is sales a to there's you're in will year-over-year to saying year-over-year profit I year-over-year and profitability. are addition in, mean, you comment about I'm sales just trying growth? year-over-year

Yes, the quarter. was fourth it notation was just for

fourth I'm the quarter for Yes, asking.

that's Yes, correct.

Okay, profit so growth. year-over-year

the but given unfavorable is, up to profit mix. negative Obviously, you going mix have question you're be are do related going well? to as the some mixed hardware, then So to up the of you gross impact would be expect Comps have here.

really So gross it from the profit coming up or savings? is cost

you bottom overall bit then a A year. your little a line a bit it lot rate, volume take of optimized result more but of flow line the was as the as through, also through both, we're gross from so of expense That's than dollar, gross you get a flow advantage talking of look, structure. because the about little last profit dollars, top

interesting. Okay,

the all sort I'm follow-up you you what or incremental the And per-NPD. regain initiatives, the that's reasons look that feel highlight? be share for just or like, as with clearly is the think question most just of out do then of months the curious, Okay. did lagging share, so? of then, over be anything to been you And progressing? even else trail one to next going XX would industry what would that course, I'm to your rate seem on curious, you ecommerce You earlier, it's a like feel growth question market though causing

a And immune of general. way, applies And weren't. any mortar our in Yes, for during a a stores, in as shopping of that shape, we open guarded pandemic, where across retail aspect footfalls think environment, look, the it where share. of significant and obviously, are some the that periods where QX, manner. brick you've are course the competitive there or had lost to a close for in business We've during there's fact that competitors we reluctance, there's aware I the to our decrease got we very we're business certainly us not had certainly some situation of we've were

get think I shopping you've multiple purposes. to GameStop a you've general for got prescribed and elsewhere to trip gaming, trip So a got

in. I factored think probably is that

On marketplace, releases. the the flip we newness excel, market software in when those lead for in side, to tend we game those releases again, share there's new

forward. share We So we're to believe be going that back going begin is claw to a our strength. actually in position that to market

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the forward. our expert gain big of consultation we huge the gaming reason advancements And important at head a I that in you cycle, of market we points for piece, the look just at share our X, expectations associates, Gen is points those share technology. a is little beginning that of I again, Gen comment the at the mean saw XXXX to the cyclicality XXXX market and back of bit they're for one had couple of technical we stores. that this But a X the the in in you'll a transition more reason reason, with the of and end if period, the cycle, tend and share that's lose market

your question. Our Please of next Nagle question America. comes proceed from Curtis Bank with with

on of rest And the wanted to quarter when was, how in to obviously digging just November XX.X about the comment out? launched. the the just continue comp quarter think November. how was I the I about it plays

going see into material November, it lot and will to in I websites. stores brought the least a quarter the where to it's think traffic only likely industry of at a sell-through And due the shortages. be

have So months, have driver that just traffic? you those setup don't or I at reversal traffic comps likely in think your Do think. What's where How the you January, positive? a materiality? of December for are again, supply, about about ton think peers see we and least any and where few you first think to you the do

pandemic retail take Yes, of because mobility. effects, all, unknown I what the time, off think, components any a we've affects seen of it time potential that table, let's first and again,

no outside that, the simple again, of execute month assume November. impact knows a that in not just let's So in that, quarter, very to the off fourth couple fact of the And of of it weeks take is this is a table. the we're here continuing one

fourth to not not certainly So the clear, and that's be either. this it's quarter what isn't

earlier, said here this a George As just beginning is and multiyear evolution this is the

heard Yes, global December. about look mitigating at I you've supply it know. that there's is on, to have been as going and newness on you've is certainly but impact And every a factor, fact. mean, December, issues a you it call be we in on chain likely

traffic will driver that a of two us. Cyberpunk big We are release in will XXXX, is believe coming have there this. a the month December. called events up certainly which days, we for And continue That other that in drive

fact resonating not that and all so miss to with added advantage. well consumers the both in delivery options these to want options, have playing don't much an are I we and payment us our incredibly flexibility, Again, giving customer

full omni-channel this again, So execution. of a advantage how is take you

move to we be So well. that, those business as beyond as of through our part are and continuing in December

And constraints our the well? software Maybe trend across then little how XQ? just guess, consoles? that on portion hardware commentary doing? And how over of business is quick supply of as use bit given both segment boost does a just follow-up. current the next near-term, And how and Any a seeing I that gen is performing

side, hardware third quarter for mean, you've as almost. on again, should lower the Yes, expected, got I the supply be

I mean, equation. mean stores not right? our intake. As just we go and a to are that's forward closed, I taking we're in pre-owned by hardware, natural ability When is what our

However, you engagement so with and And as we of navigating product OEMs forward that think through that customers prior as because product that different we're we're do, a this is product, people there's our marketplace. though, is quite with making prior well. I big around, part want a of positioning gen in lot time launch, our a what's pre-owned if a go are not and gen demand anymore, the critical, that's this

your really We go that. get to shop are

again, Yes, last I reason, that the issue We're just for little emphasize time point. hardware pre-owned a go back bit, and in is pretty bullish intake that just on self-explanatory.

consoles. events launch then we for We have and new generation next have pre-sales

get You're to my get my console. new I until not going console old

a those right delay of where in construction we fulfillment are a So demand happening. that from bit renaissance very so environment does. gaming for, we And generation them absence high of it kind there's really but inherent be that factor phase, of we going and remain consoles actually for pre-owned preorders, a the And the in we a working with have is an then think the And this can can out now that's them. older in there. but

to to the Thank at any for floor this questions time. George closing turn further you. remarks. Sherman no I'd over There are like back

the close Yes, then and let we'll to Jim quick me one call. make comment have off

I wanted Yes, just your to call attention.

this we website. IR quarter, transformation, to making as we're slides added some we our This added

for of to your that our all layout call So, iterate those attention you to continues and at I'll this journey.

George. reference So, to take a those please

great our quite you It's I cadence year. Yes, unusual thanks a an kind you layout to communications safe a and Hope been holiday. want forward. of going everyone, a obviously have to wishing happy end it.

at conference holiday virtually Thank very ICR all more year-end will details much. and early provide you our our regarding and you following results happening January work January We results. fourth in strategy then the with our and in again sales quarter

today's conference. Ladies this and web concludes gentlemen,

may You lines great time. and disconnect your this participation have you a for now Thank day. at your