GameStop enters into $700 million deal
GameStop is getting out of the mobile phone business as it moves to sharpen its focus on videogames and collectibles.
GameStop Corp. has entered into an agreement to sell its Spring Mobile business to Prime Communications L.P. for $700 million. Spring Mobile owns and operates a network of 1,289 AT&T wireless stores. The transaction is expected to close in the fourth quarter.
The move is in line GameStop’s previously announced review of its strategic and financial alternatives.
“This transaction enables GameStop to enhance our performance with an increased focus on the video game industry and the rapidly-growing collectibles space,” said Dan DeMatteo, executive chairman of GameStop’s board of directors. “These are areas where we have considerable experience and where we are well positioned to capitalize on our competitive position.”
GameStop said proceeds from the sale will be used to reduce the company’s outstanding debt, fund share repurchases, reinvest in core video game and collectibles businesses to drive growth, or some combination of these options.
In September, the retailer reported mixed results for its second quarter and confirmed it is considering a potential sale of the company among other options.
GameStop operates over 7,100 stores across 14 countries.
Foot Locker plays hard in Q3
Athletic footwear giant Foot Locker turning in a winning third quarter, with sales and earnings that topped Wall Street expectations.
Net income for the quarter ended November 3, 2018 was $130 million, or $1.14 per share, compared to net income of $102 million, or 81 cents per share in the year-ago period. Excluding items, earnings came in at 95 cents per share, topping analysts’ expectations of 92 cents per share.
Total third quarter sales decreased 0.5% to $1.86 billion this year, topping estimates. (The 53rd week shift impact reduced sales by approximately $60 million during the third quarter.) Same-store sales increased 2.9%, better than expected.
In response to sluggish sales, Foot Locker has been investing to improve its digital and in-store experience, along with collaborations with vendors. Its third quarter results suggest the efforts are beginning to pay off.
“Our accelerating comparable sales and improving bottom line reflect the strategic partnerships with our vendors, as well as our efforts to inspire and empower youth culture and create deeper connections with local communities,” said Richard Johnson, chairman and CEO, Foot Locker. “We believe we are well positioned to produce even stronger results in the all-important holiday selling season and the fourth quarter overall.”
Canaccord Genuity consumer analyst Camilo Lyon noted that in addition to Foot Locker’s improving product mix, the chain is collaborating extensively with such key vendor partners as Nike to offer a unique and differentiated experience to its customers.
“Also, the initial success of new stores in Asia and power stores (experiential, community focused) highlight incremental long term revenue drivers,” Lyon added.
As of November 3, the company operated 3,266 stores in 26 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 108 franchised Foot Locker stores were operating in the Middle East, as well as 10 franchised Runners Point stores in Germany.
Ross Stores Q3 profit tops expectations but outlook disappoints
Off-price retailer Ross Stores has lowered its outlook for holiday sales gains in anticipation of a “fiercely competitive” retail market.
Net earnings grew to $338 million for the quarter ended Nov.3, up from $274 million in the prior year. Earning per share for the quarter came in at $.91 cents, easily topping analysts’ estimates of $.71 per share.
Third quarter sales rose 7% to $3.5 billion, just short of expectations. Same-store sales rose 3%.
“Both sales and earnings for the quarter were ahead of our forecast, despite being up against very strong multi-year comparisons,” said Barbara Rentler, CEO. “Though above plan, operating margin of 12.4% was down from last year as higher merchandise margin was more than offset by increases in freight costs and this year’s wage investments.”
Analyst Neil Saunders, managing director of GlobalData Retail, noted that Ross’ continued expansion — the chain opened 93 stores during the past 12 months — has helped boost revenue.
“This enlargement of the fleet continues the expansion program that has been ongoing for some time,” he said. “Ross’ recent increase in its store growth targets to 3,000 outlets across the U.S. ensures that overall growth will be supported for some time to come.
Looking to the holidays, Ross said it is expecting another fiercely competitive retail environment.
“As a result, while we hope to do better, we continue to project fourth quarter comparable store sales gains of 1% to 2% versus a strong 5% increase last year,” Rentler said. Analysts has expected an increase of 2.2%.
Ross is now forecasting earnings per share for the quarter to be in the range of $1.09 to $1.14, which includes a one-time, non-cash benefit of approximately $.07 per share related to the favorable resolution of a tax matter. This updated guidance compares to earnings per share for the 14 weeks ended February 3, 2018 of $1.19, which included a per share benefit of $.14 from a one-time revaluation of deferred taxes and $.10 from the 53rd week.”
Based on its year-to-date results and updated fourth quarter guidance, Ross is planning earnings per share for fiscal 2018 to be in the range of $4.15 to $4.20.