GameStop Corp. (NYSE:GME) Q3 2019 Earnings Conference Call - Final Transcript

Dec 10, 2019 • 05:00 pm ET

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GameStop Corp. (NYSE:GME) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] We'll now take our first question from Stephanie Wissink with Jefferies. Please go ahead.

Analyst
Ashley Helgans

Hi. This is Ashley Helgans on for Steph Wissink. Thanks for taking our question. The SG&A ratio remains the distorted versus sales even with the cost optimization program in place. How should we think about the phasing of savings going forward?

Executive
James Bell

Yeah, I think. Hi, Ashley this is Jim. I think you can -- as we've talked about, the vast majority of the savings you could see in the third quarter this year versus last year, but as it starts to annualize over the course of 2020 you're going to see obviously better impact on an annualized basis. We're just really seeing the first full quarter of the effect in the third quarter of this year.

Analyst
Ashley Helgans

Okay, great, that's helpful. And then if I can squeeze in one more. Just on the collectible margins were down year-over-year, any reason for the change?

Executive
George E. Sherman

Yeah. Ashley, it's George. We saw the need to work through some inventory that was not as productive as what's being brought in from a collectible standpoint. So it is the lone category that actually had margin rate go down and that was a very conscious effort on our part to move through some inventory.

Analyst
Ashley Helgans

Thank you.

Executive
James Bell

And it's also indicative of how we are focused on the inventory management and being able to take the decisive action on places where it makes sense for us to do it, especially as we then manage our buy plans going forward.

Analyst
Ashley Helgans

Thank you, for the color. I'll pass it off to someone else.

Operator
Operator

We'll now take our next question from Seth Sigman with Credit Suisse. Please go ahead.

Analyst
Lavesh Hemnani

Hi. This is Lavesh Hemnani on for Seth Sigman. Our first question is on, I mean free cash flow. I mean, could you just talk about the components of free cash flow for the year and how are you thinking about the levers to offset the lower earnings?

Executive
James Bell

Yeah. I think it's very straightforward. I think the biggest driver of free cash flow from the perspective of us continuing to generate strong free cash flow is our focus on inventory management. And this is a critical factor as we continue to drive our inventory levels down, manage the way that we're buying inventory, manage the way we're churning inventory over, manage the end-to-end life cycle of our -- really be all the way through initial set, all the way through promo and markdown in terms of the product life cycle. That is how we really view the generation of free cash flow in this business and the main driver.

Analyst
Lavesh Hemnani

Got it. And just some follow-up on the cost reduction plans. Do you have any updated views on how the cost restructuring is progressing. And I mean, are you able to find any incremental opportunity versus your prior plan. And related to that in the short-term, I mean to what extent do you think this may