-- Net Income Triples
-- Comparable Store Sales Rise 6.7%
-- Revenues Are 18% Higher Than Year-Earlier Total
WEST CHESTER, Pa., Nov. 19 /PRNewswire/ -- Electronics Boutique Holdings
Corp. (Nasdaq: ELBO), the world's largest specialty retailer of electronic
games, today reported net income of $1.6 million, or $0.08 per share, on
revenues of $111.3 million in the third fiscal quarter of 1998, which ended on
October 31, 1998.
This compares with pro forma net income of $386,000, or $0.02 per share,
and revenues of $94.2 million in the third quarter of fiscal 1997. The pro
forma results assume that Electronics Boutique was a C corporation in the
third quarter of fiscal 1997; the company converted from S corporation to C
corporation status in July, 1998 in connection with its initial public
offering. Shares outstanding totaled 20.2 million in the third quarter of
fiscal 1998, compared to 15.8 million a year earlier.
During the third quarter, comparable store sales -- those in stores open
one year or more -- increased by 6.7 percent over the year-earlier total.
Electronics Boutique had 500 stores in operation at the end of this year's
third quarter, compared with 439 a year earlier.
Joe Firestone, president and chief executive officer, noted that the
company's performance improved markedly by a variety of measures.
"I'm especially delighted with a gain of nearly 7 percent in comparable
store sales," he said. "What's remarkable is that we achieved this gain
despite not having a blockbuster new game in this year's third quarter,
whereas in the third quarter of 1997 we sold 110,000 units of the game Final
Fantasy VII at approximately $50 each. This shows the current strength of
customer demand in most of our product categories including Playstation and
Nintendo 64 software."
Mr. Firestone added that a third quarter 1998 increase in the cost of
goods sold as a percent of net sales was caused almost entirely by higher
freight costs, and that freight costs were higher for three reasons.
"The first reason was our effort to expedite a larger percentage of new-
release products to our stores," he said. "The second was an increase in the
number of units shipped to our stores as a result of lower average cost per
unit. Third was the early build-up at our stores of the substantial
quantities of product that they will need for the fourth quarter. We shipped
earlier than usual so that during the height of the holiday season our stores
can focus on customers rather than unpacking boxes."
Other areas in which the company's performance improved included:
-- Selling, general and administrative expense, which was 20.4 percent of
total revenues in the third quarter of this year, down from 23.0 percent a
year earlier. Factors contributing to this improvement included an increase
in promotional and marketing reimbursements as a percent of total revenues,
including the effect of more than $800,000 in website advertising income,
partly offset by an unusual charge of $1.0 million in last year's third
quarter relating to a Canadian joint-venture prior to Electronics Boutique's
acquisition of its partner's remaining 50 percent interest.
-- Operating margin, which rose to 2.3 percent of total revenues in the
third quarter of 1998 from 0.7 percent a year earlier.
-- Interest: Electronics Boutique had net interest income of $149,000 in
the third quarter of 1998, compared with net interest expense of $343,000 in
last year's third quarter. The improvement occurred as some proceeds from the
IPO were used to pay off the company's debt and the balance generated net
interest income.
In the nine months ended October 31, 1998, the company earned pro forma
net income of $3.0 million, or $0.18 per share and revenues of $321.1 million.
A year earlier, pro forma net income totaled $350,000 or $0.02 per share on
revenues of $251.8 million. Comparable store sales were up by 13.7 percent in
the first nine months of fiscal 1998 compared with a year earlier.
"Among the many positive developments of fiscal 1998 for Electronics
Boutique is the continuing strong growth of our Internet sales," Mr. Firestone
said. "More than 4800 products are now available for sale on our website,
which is updated daily. Thanks in part to the tremendous success of a newly
designed website that was introduced at the beginning of September this year,
sales via our http://www.ebworld.com Internet site were 374 percent higher in 1998's
third quarter than in the comparable period of 1997."
He said Electronics Boutique expects to open 34 new stores in the U.S.and
internationally in the fourth quarter. This number will enable the company to
exceed its goal of 80 store openings in the current fiscal 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 500 stores in 43 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 (Unaudited)
(Amounts in thousands, except share and per-share amounts)
Thirteen Weeks EndedThirty-nine Weeks Ended
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
Net Sales $110,664 $93,700 $319,324 $250,282
Management fees 635 539 $1,736 1,527
Total Revenues 111,299 94,239 321,060 251,809
Costs and Expenses:
Cost of merchandise sold,
including freight 83,628 70,060 239,053 186,308
Selling, general and
administrative 22,657 21,692 68,987 58,914
Depreciation and
amortization 2,495 1,847 7,154 5,588
Operating Income 2,519 640 5,866 999
Equity in loss of affiliates -- (80) (160) (240)
Interest (income) expense,
net (149) 343 660 1,033
Preacquisition loss of
subsidiaries -- 358 -- 628
Income before income
tax expense 2,668 575 5,046 354
Income tax expense 1,046 62 1,236 89
Net income $1,622 $513 $3,810 $265
Net income per share
-- basic and diluted $0.08 -- -- --
Weighted average shares
outstanding --
basic and diluted 20,169,200 -- -- --
Pro Forma Data (see note)
Pro forma operating income -- 640 5,670 999
Pro forma income before
income tax expense -- 655 5,010 594
Pro forma income tax expense -- 269 1,964 244
Pro forma net income -- $386 $3,046 $350
Pro forma net income per share
-- basic and diluted -- $0.02 $0.18 $0.02
Pro forma weighted average
shares outstanding --
basic and diluted -- 15,794,200 17,316,636 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 unaudited 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 (Unaudited)
(Amounts in thousands)
October 31, August 1,
1998 1998
Cash and cash equivalents $4,087 $23,940
Merchandise inventories 92,972 54,158
Total current assets 113,107 89,056
Total assets 161,880 134,760
Current liabilities 127,275 94,848
Total liabilities 129,640 103,731
Stockholders' equity 32,240 31,029
SOURCE Electronics Boutique Holdings Corp.
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Related links:
http://www.ebworld.com
CONTACT:
John R. Panichello, Chief Financial Officer
of Electronics Boutique Holdings Corp., 610-430-8100; or Jerry
Meyer, General Info., Lynn Sawyer-Landau, Analyst Info., or Alan
Goldsand, Media Info., all of The Financial Relations Board,
212-661-8030
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