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Electronics Boutique Reports Strong Gains in Revenue and Net Income in Fourth Fiscal Quarter
-- Sales and Profits Both Are New Records
-- SG&A Declines As Percent of Sales
-- Comparable Store Sales Up More Than 14%
-- Internet Sales Up More Than 1200%
WEST CHESTER, Pa., March 17 /PRNewswire/ -- Electronics Boutique Holdings
Corp. (Nasdaq: ELBO), the world's largest specialty retailer of electronic
games, today reported record net income of $16.5 million, or $0.81 per share
fully diluted, on record revenues of $252.9 million in the fourth quarter of
its 1999 fiscal year, which ended on January 30, 1999.
This compares with pro forma net income of $11.4 million, or $0.72 per
share fully diluted, and revenues of $202.2 million in the fourth quarter of
fiscal 1998, when net income and revenues included a $2.2 million performance
bonus under the company's management agreement with Electronics Boutique Plc
of the U.K. The pro forma results assume that Electronics Boutique was a C
corporation in the fourth quarter of fiscal 1998. The company converted from
S corporation to C corporation status in July, 1998 in connection with its
initial public offering. Weighted average shares outstanding totaled 20.4
million in the fourth quarter of fiscal 1999, compared to 15.8 million a year
earlier.
Comparable store sales -- those in stores open one year or more -- were
14.6% higher in the fourth quarter of fiscal 1999 than a year earlier.
Several of the causes of this gain were in the video game segment: a strong
selection of new releases throughout the quarter, high interest in accessories
related to these titles, and robust hardware sales. Another factor was
continuing demand for hardware accessories for both video game systems and
personal computers.
Electronics Boutique had 528 stores in operation as of January 30, 1999, a
gain of 16.8 percent over 452 stores a year earlier.
Joseph J. Firestone, president and chief executive officer, said two
factors were important in generating a 45 percent increase in net income
during a quarter in which the revenue gain was 25 percent over the
year-earlier figure.
"In addition to the growth in the number of stores and gains in
comparable-store sales, we maintained tight control over increases in selling,
general and administrative expenses," Mr. Firestone said. "Also, our highly
automated distribution system made possible a lightning-fast response to
customer demand. Additionally, because we are free of debt, we generated
$0.4 million in interest income in the fourth quarter of fiscal 1999, compared
to interest expense of $0.3 million a year earlier.
"For years we have been investing in a distribution system that really
does set Electronics Boutique apart from the competition, and the results were
very apparent in last year's November-December holiday season," Mr. Firestone
continued. "We were able to replenish our stores six times a week, and to get
hot new products into the hands of our customers within a day or two of their
release."
In the 1999 fiscal year as a whole, the company had record pro forma net
income of $20.1 million, or $1.11 per share fully diluted, and record revenues
of $571 million. In fiscal 1998, pro forma net income totaled $11.7 million,
or $0.74 per share, on revenues of $454 million. Weighted average shares
outstanding totaled 18.1 million in fiscal 1999, compared to 15.8 million a
year earlier.
Comparable store sales were 14.1 percent higher in fiscal 1999 than in the
preceding year.
The cost of goods sold was 76.7 percent of Electronics Boutique's net
sales in the fourth quarter of fiscal 1999 and 75.7 percent in the year as a
whole, compared with 76.5 percent in the fourth quarter of fiscal 1998 and
75.4 percent in that year. These slight increases had a number of causes
including more aggressive pricing in certain product categories to gain market
share and sales volume, higher freight costs resulting both from shipping more
units and from changes in freight service to improve service to stores, and a
reduction in MAP (minimum advertised price) pricing by the manufacturers of
Playstation and Nintendo products. These factors were partly offset by
increased purchase discounts and the impact of aggressive inventory management
in reducing shortages.
Selling, general and administrative expense has declined as a percent of
total revenues. The percentage was 12.2 percent in the fourth quarter of
fiscal 1999 and 17.4 percent in the year as a whole; the comparable figures
from the fourth quarter and all of fiscal 1998 were 13.9 percent and
19.2 percent respectively. Mr. Firestone said the company's success in
containing general and administrative expenses while expanding the store base
contributed to the improvement, as did website advertising income of more than
$1 million in the fourth quarter and $2.6 million in fiscal 1999 as a whole.
Electronic commerce sales via the company's upgraded www.ebworld.com
Internet site increased dramatically in fiscal 1999. E-commerce sales were
more than 1,200 percent higher in the fourth quarter of fiscal 1999 than a
year earlier, and unique visits to the Electronics Boutique website increased
to 3.5 million from 417,000 over the same period. During the full 1999 fiscal
year, the company had more than 10 million unique visits to its website.
Mr. Firestone said sales via the Electronics Boutique web site totaled
$4.3 million in fiscal 1999 and are planned to increase to more than
$16 million in the current fiscal year. He said the company plans to
substantially increase dollars spent on the promotion of its website to
increase customer traffic.
Mr. Firestone said Electronics Boutique plans to open approximately
100 additional stores in the current fiscal year in the U.S., Canada and
Australia, and is expecting revenue gains of approximately 25 percent for the
year.
Electronics Boutique is the leading specialty retailer of video and
computer games and also sells video game hardware, PC productivity software
and accessories. The company currently operates 544 stores in 44 states,
Puerto Rico, Canada, Australia and South Korea, primarily under the names
Electronics Boutique and Stop 'N Save Software.
This press release contains "forward-looking statements." Electronics
Boutique ("EB") is including this statement for the express purpose of
availing itself of the protections of the safe harbor provided by the Private
Securities Litigation Reform Act of 1995 with respect to all such
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially.
These risks include, but are not limited to, EB's dependence on the continued
introduction of new and enhanced video games and PC hardware and software;
the cyclical nature of the video game market; the rapid technological changes
which occur in the video game and PC industry; EB's ability to open and
operate new stores on a profitable basis; the intensely competitive nature of
the electronic game industry and its rapid changes in consumer preferences and
frequent new product introductions; the seasonal nature of the retail
industry; EB's dependence on its suppliers for products; risks inherent to
conducting international operations; and consumer spending patterns and
prevailing economic conditions. Please refer to Electronics Boutique's
registration statement on Form S-1 on file with the SEC for a more detailed
discussion of these and other risks that could cause results to differ
materially.
Electronics Boutique Holdings Corp.
Consolidated Statements of Income
(Amounts in thousands, except share and per-share amounts)
Thirteen Weeks Ended Fifty-two Weeks Ended
Jan. 30, Jan. 31, Jan. 30, Jan.31,
1999 1998 1999 1998
Net Sales $251,190 $198,898 $570,514 $449,180
Management fees 1,669 3,265 3,405 4,792
Total Revenues 252,859 202,163 573,919 453,972
Costs and Expenses:
Cost of merchandise
sold, including
freight 192,691 152,190 431,744 338,498
Selling, general
and administrative 30,985 28,089 99,972 87,003
Depreciation and
amortization 2,621 2,409 9,775 7,997
Operating Income 26,562 19,475 32,428 20,474
Equity in loss of
affiliates -- 3,143 (160) 2,903
Interest (income)
expense, net (370) 347 290 1,380
Preacquisition loss
of subsidiaries -- 285 -- 913
Income before income
tax expense 26,932 22,556 31,978 22,910
Income tax expense 10,457 757 11,693 846
Net income $16,475 $21,799 $20,285 $22,064
Net income per
share -- basic $0.82 -- -- --
Net income per
share - diluted $0.81 -- -- --
Weighted average shares
outstanding
-- diluted 20,386,530 -- -- --
Pro Forma Data (see note)
Pro forma operating income $19,377 $32,232 $20,376
Pro forma income before
income tax expense 19,314 31,942 19,909
Pro forma income tax expense 7,938 11,866 8,182
Pro forma net income $11,376 $20,076 $11,727
Pro forma net income
per share - basic $0.72 $1.11 $0.74
Pro forma net income
per share - diluted $0.72 $1.11 $0.74
Pro forma weighted average
shares outstanding
--diluted 15,794,200 18,084,109 15,794,200
Electronics Boutique Holdings Corp. (the "Company") completed its initial
public offering on July 29, 1998. Historical statements of income prior to
that date include the results of operations of the Company's predecessors.
Immediately prior to the public offering a series of reorganization
transactions occurred in which the Company acquired substantially all of the
assets and liabilities of its predecessors and The Electronics Boutique, Inc.,
a predecessor to the Company, retained certain assets, including the West
Chester distribution center and headquarters and the shares of Electronics
Boutique plc. The pro forma data is presented in order to illustrate the
effect on the consolidated statements of income as if these assets were
retained as of the beginning of the fiscal year. Additionally, prior to the
offering, The Electronics Boutique, Inc. was taxed as an S Corporation for
federal and certain state income tax purposes. The pro forma data also
reflects the adjustment to record income taxes as if the company had been a C
Corporation for federal and state income tax purposes.
A more detailed explanation of the above pro forma adjustments can be
found in the company's registration statement relating to its initial public
offering filed with the Securities and Exchange Commission.
Electronics Boutique Holdings Corp.
Consolidated Balance Sheet Data
(Amounts in thousands)
Jan. 30, Jan. 31,
1999 1998
Cash and cash equivalents $42,006 $20,640
Merchandise inventories 65,433 52,973
Total current assets 117,614 83,714
Total assets 172,047 142,791
Current liabilities 120,705 101,442
Total liabilities 123,205 114,392
Stockholders' equity 48,842 28,399
SOURCE Electronics Boutique Holdings Corp.
CO: Electronics Boutique Holdings Corp.
ST: Pennsylvania
IN: CPR
SU: ERN
03/17/99 17:26 EST prnewswire.com
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