Electronics Boutique Holdings Corp., a leading global specialty retailer of video games and related products, today announced financial results for the second quarter and six months ended July 30, 2005.
Financial Results and Company Outlook
For the second quarter of fiscal 2006, total revenue increased 23.9% to $448.3 million from $361.9 million in the comparable period last year. Comparable store sales increased 2.6% driven primarily by continued demand for Sony's PSP and 17.8% growth in video game software sales. Second quarter gross margin on sales was 30.3% versus 29.5% last year due to strong sales of higher-margin pre-played hardware and software and accessories. Leading titles during the quarter included NCAA Football 2006 from Electronic Arts, Star Wars Episode III: Revenge of the Sith from Lucas Arts, and Pokemon Emerald from Nintendo.
As previously announced, during the second quarter the Company acquired a 138 store retail chain located in Spain, Jump Ordenadores S.L.U. ("Jump"), which primarily sells PCs, software, digital cameras, and related electronics products. The Company has started to introduce new video game software and hardware and pre-played products into Jump's stores. As a result of the acquisition and the Company's transition efforts, net income for the second quarter of fiscal 2006 includes a net loss of $1.0 million, or $0.04 per diluted share, related to the Jump business.
Excluding costs related to the pending merger with GameStop Corp. and the net loss associated with the Jump acquisition, net income for the second quarter of fiscal 2006 was $3.5 million, or $0.14 per diluted share. On a GAAP basis, which includes $1.4 million of pre-tax merger related costs ($0.9 million after-tax) and the net loss of $1.0 million from the Jump business, net income for the second quarter of fiscal 2006 was $1.6 million, or $0.06 per diluted share. This compares to net income of $3.9 million, or $0.16 per diluted share, in the same period last year. Please see the schedule accompanying this release for the full reconciliation of GAAP to comparable basis net income and net income per share.
During the quarter, the Company added 227 new stores, including the 138 stores located throughout Spain that were acquired from Jump. The Company ended the second quarter of fiscal 2006 with 2,280 stores compared to 1,733 at the end of the second quarter of fiscal 2005.
During the first six months of fiscal 2006, total revenue rose 30.1% to $955.4 million from $734.4 million in the comparable period last year. Excluding costs related to the pending merger with GameStop Corp. and the net loss associated with the Jump acquisition, net income was $7.2 million, or $0.29 per diluted share. On a GAAP basis, which includes $2.9 million of pre- tax merger related costs ($1.8 million after-tax) and a net loss of $1.0 million from the Jump business, net income for the first six months of fiscal 2006 was $4.4 million, or $0.17 per diluted share. This compares to net income of $6.9 million, or $0.28 per diluted share, in the same period last year. Please see the schedule accompanying this release for the full reconciliation of GAAP to comparable basis net income and net income per share.
Based on results to date and current business trends, the Company reiterates its previous fiscal 2006 outlook for diluted earnings per share to range from approximately $2.34 to $2.44. The Company's outlook excludes the impact of the Jump acquisition or any merger related costs.
In early August, the Company established a presence in Switzerland by acquiring PC-Joy AG, a Zurich-based retailer with nine locations that offer video games, PC games, video game hardware, computer hardware, and related accessories.
Jeffrey Griffiths, President and Chief Executive Officer, stated, "During the quarter, our team continued to execute our key business initiatives and delivered solid second quarter results that were in-line with our expectations. In addition, the acquisition of PC-Joy in Switzerland furthers our longstanding strategy to expand into international markets and provides a new opportunity for global growth. We look forward to leveraging our existing European infrastructure to develop a strong presence in this market."
Pending Merger Agreement
As previously announced on April 18, 2005, Electronics Boutique and GameStop Corp. entered into a definitive agreement and plan of merger that will create a leading video game retailer with over 4,000 stores worldwide. The waiting period under the Hart-Scott-Rodino Improvements Act expired on June 9, 2005 and the Company and GameStop are now responding to questions from the Securities and Exchange Commission regarding their S-4 registration statement and Form 10-Ks. The merger is now expected to close in early October 2005.
Jeffrey Griffiths, President and Chief Executive Officer, stated, "We believe joining forces with GameStop will result in a compelling combination and we look forward to our future as a combined entity. Under the assistance of our advisors, we are working closely with GameStop to help the transition move forward smoothly and we are pleased with the progress our integration teams are making."