Electronic Boutique Sees Minor Profit Decrease, Revenue Boost

Officials from Electronics Boutique have announced the company’s fourth quarter and full year results, showing that the fourth quarter total revenue increased 20.5 percent to $809.0 million, while comparable store sales increased 3.0 percent, versus an increase of 2.0 percent last year. However, fourth quarter net income was $38.1 million, down from a figure last year of $39.4 million, apparently due to a change in the company's store lease accounting. Nonetheless, EB's sales were led by a 22 percent increase in software as well as the launch of the Nintendo DS and were strong across all geographic regions. During the quarter, the company opened 108 new stores. For the full year, total revenue increased 24.2 percent to $1,989.4 million. During the year, the company opened 449 new stores, increasing the total store count to 1,977 as of January 29th. Full year net income was $52.3 million, compared to $45.7 million in the previous year. Commenting on the results, Jeffrey Griffiths, President and CEO, stated, "Fiscal 2005 marked a very successful year for our Company, and this is reflected in our performance across all areas of our business. With respect to our financial performance, robust top line expansion was supported by solid software sales, led by the success of Microsoft's Halo 2 and Take Two's Grand Theft Auto: San Andreas, and slightly offset by the industry-wide hardware shortages in the fourth quarter. In addition to driving sales, we made a number of operational improvements to enhance our efficiency and improve margins which contributed to our strong bottom line result.” The company now expects first quarter total revenue to increase between 30 and 34 percent, driven by a comparable store sales increase of 9 to 13 percent. For the full year, the company anticipates a total revenue increase in the range of 15 to 20 percent, with comparable store sales of flat to 3 percent. Griffiths further commented that fiscal 2006 would be “a year of transition”, adding that: "The first half release schedule is strong relative to last year. However, we will face tougher comparisons in the third and fourth quarters given the exceptionally strong holiday line-up in 2004. We face some uncertainty surrounding the timing of the new Xbox 2 launch, which could cause our earnings estimates to shift between quarters or even years." However, this does not necessarily imply any change in the widely rumoured holiday release date for the next generation Xbox, with Electronic Boutique’s fourth fiscal quarter occurring between November 2005 and January 2006, and a follow-up earnings call indicating EB expects a fourth-quarter release for Microsoft's next hardware platform.