GameStop Corp New (NYSE:GME) Q4 2019 Earnings Conference Call - Final Transcript

Mar 26, 2020 • 06:00 pm ET


GameStop Corp New (NYSE:GME) Q4 2019 Earnings Conference Call - Final Transcript


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George Sherman

impact has been minimal. As Jim will highlight during his remarks, we will pay all U.S. employees whose hours have been eliminated an additional two weeks at the regular pay rate based on the average hours worked over the last 10 weeks. In addition, the company will reimburse all benefit eligible U.S. employees one month of the employee portion of the benefit expenses.

Now turning to a review of fiscal 2019 beginning with our fourth quarter. The fourth quarter concluded a year in which we achieved significant progress against our key priorities focused on optimizing our business model, strengthening our balance sheet, and improving our cash flow in a period that was expected to see significant declines in sales. Our overarching goal is to capitalize on GameStop's leading global market position and strong loyalty base to stabilize sales trends and ultimately position the company for sustained long-term profitable growth. Overall, our fiscal year top line results were in line with our January update. Our bottom line results were better than expected demonstrating strong progress toward our key priorities of fueling gross margin expansion, a reduction in SG&A expenses, and a strengthened balance sheet. As expected, sales were down double-digits driven by the industry wide headwinds we've discussed before. As we are in the late stages of the current console cycle as well as working against a strong fiscal 2018 fourth quarter, which saw a strong accessories business related to Fortnite market penetration.

We are steadfast in our mission to accelerate the changes needed to our operating model to position the company to capitalize on the way consumers are shopping and gaming today. We're accelerating our digital capabilities and testing new experiential elements in their stores. In 2019, we built a new web platform, introduced new omnichannel capabilities including buy online pickup in stores with encouraging results. However, we are still early in that activity. In terms of the fourth quarter results overall, consolidated global sales were $2.2 billion, reflecting a comparable sales decline of 26% and we delivered adjusted operating income of $109 million and adjusted earnings per share of $1.27. For the fiscal year, consolidated global revenue declined 22% reflecting a comparable store sales decline of 19.4%. Adjusted operating income was $62 million and adjusted EPS was $0.22. We remain intensely focused on inventory reduction and working capital improvements in fiscal 2019 and these efforts drove a 31% reduction in inventory and a 64% reduction in accounts payable, putting us in position to enter fiscal year 2020 with a significantly stronger balance sheet fundamental.

2019 was a challenging year as we entered the low point in demand for the current console cycle. However, there were some bright spots and we made significant progress against our key initiatives. As a reminder, our strategic plan is anchored on four key tenets: first, optimizing the core by improving efficiency and effectiveness in everything we do. Second, creating a social and cultural hub of gaming within each GameStop store and online. Third, building