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Earnings Highlights and Summary

For the first quarter of the fiscal year 2018, GameStop's total global sales decreased 5.5% to $1.93 billion compared to $2.05 billion in Q1 2017. The Company's revenue numbers lagged analysts' estimates of $1.96 billion.

During Q1 2018, GameStop's consolidated comparable store sales fell 5.3% on a y-o-y basis, with a 2.6% drop in the US and 11.6% decline internationally.

During Q1 2018, GameStop's gross margin declined 30 basis points (bps) to 34.0%, with an increase in Collectibles sales and margin which was more than offset by declines in tech brands sales and pre-owned sales and gross margin. The Company's total operating earnings were $57.1 million in the reported quarter compared to $101.1 million in the prior year's same quarter. On an adjusted basis, GameStop's total Company operating earnings were $69.7 million compared to $108.4 million in Q1 2017.

GameStop's GAAP net income was $28.2 million, or $0.28 per diluted share, in Q1 2018 compared to $59.0 million, or $0.58 per diluted share, in Q1 2017. The Company's results for the reported quarter included store closure charges and other charges related to management changes of $12.6 million.

Excluding store closure and other charges, GameStop's adjusted net income was $39.0 million, or $0.38 per diluted share, in Q1 2018 compared to $63.6 million, or $0.63 per diluted share, in Q1 2017. The Company's earnings surpassed Wall Street's estimates of $0.35 per share.

Segment Results

For Q1 2018, GameStop's new hardware sales decreased 7.9% to $359.2 million, while its new software sales dropped 10.3% to $466.7 million on a y-o-y basis, with each of these categories impacted by the highly successful launch of the Nintendo Switch in Q1 2017. During the reported quarter, the Company's software sales were further impacted by the strength of titles across platforms that launched in FY17.

GameStop's pre-owned sales declined 5.8% to $495.7 million on a y-o-y basis in Q1 2018, while its worldwide omnichannel sales decreased 46.0% due to limited allocation of the Nintendo Switch at launch, which drove a 92.9% increase in omnichannel sales in Q1 2017.

During Q1 2018, GameStop's digital sales and non-GAAP digital receipts increased 29.6% and 24.2%, respectively, excluding revenues from the Kongregate unit which was sold in July 2017. On a reported basis, the Company's digital sales decreased 2.5% to $43.0 million, while its non-GAAP digital receipts advanced 16.2% to $273.7 million.

For Q1 2018, GameStop's collectibles sales increased 24.4% to $142.4 million, driven by a continued expansion of licensed merchandise offerings and unique product offerings. The Company's Technology Brands sales fell 16.1% to $169.0 million in the reported quarter, primarily due to less promotional activity and the overlap of the change in AT&T's dealer compensation structure in FY17. The Company's Technology Brands GAAP operating earnings were $9.8 million. The Company's Technology Brands operating earnings, excluding store closure and other charges, were $11.2 million compared to $18.4 million in the prior year's same quarter.

Cash Matters

GameStop ended Q1 2018 with $247 million in cash, which was a little less than last year, primarily due to the timing of vendor payments. The Company's inventory was up 7%, or roughly $90 million, with the increase primarily attributable to hardware.

Outlook

For the full fiscal year 2018, GameStop is forecasting revenues to be in the range of down 6% and down 2%, with same-store sales ranging from down 5% to flat. The Company is expecting adjusted earnings per share to be in the band of $3.00 to $3.35.

Stock Performance Snapshot

June 28, 2018 - At Thursday's closing bell, GameStop's stock rose 1.92%, ending the trading session at $14.88.

Volume traded for the day: 1.72 million shares.

Stock performance in the last month - up 10.88%; and previous three-month period - up 17.91%

After yesterday's close, GameStop's market cap was at $1.53 billion.

Price to Earnings (P/E) ratio was at 33.07.

The stock has a dividend yield of 10.22%.

The stock is part of the Services sector, categorized under the Electronics Stores industry. This sector was up 0.4% at the end of the session.

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