GameStop Corp (GME) 2005 Q1 法說會逐字稿

Good afternoon, and welcome to the Electronics Boutique Holding Corporation first-quarter 2005 conference call.

You should have received a copy of the press release issued after the close of the market today.

If you did not, you can obtain a copy right now on the investor section of our Website at www.EBholdings.com.

With me today from management are Jeff Griffiths, President and Chief Executive Officer and Jim Smith, Chief financial Officer.

Before we begin the call today, I would like to remind everyone that certain statements contained in today's press release and on this conference call are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

For a more detailed discussion of some of the ongoing risks and uncertainties of the Company's business, I refer you to the press release and the Company's recent filings with the Securities and Exchange Commission.

Some of the material presented today may be outdated and Electronics Boutique Holding Corporation undertakes no obligation to revise or update the information provided during the conference call.

The telephone playback of the conference call will be available from today 8 PM through midnight May 27, 2004.

The call will also be archived on EB's Website for two weeks.

Now I would like to turn the call over to Mr. Griffiths.

Thank you.

Let me start by saying that Electronics Boutique had another great quarter during which we advanced in every area of our business strategy.

Compared with the same quarter last year, our total company software sales grew 28 percent and our hardware sales grew 19 percent.

Our domestic numbers were also exceptional as we out-performed our industry for the quarter and again gained additional market share according to NPD data.

Our pre-played sales were particularly strong, demonstrating our continued progress in growing this important part of our business.

Our new store opening plan is on schedule with the opening of 104 new locations during the quarter.

And our international business continues to exceed our performance expectations.

We believe that these results reflect three key factors, the strength of our industry, the success of our business model and the outstanding dedication of our employees.

Today I'd like to elaborate on the drivers behind our business strategy and to discuss why we believe that both our Company and our industry face strong growth prospects.

Following my comments, Jim will fill you in on the financial details for the quarter and give you our guidance for the second quarter.

I'll begin by reviewing where the industry stands.

The installed base in the U.S. is now 61 million units.

We believe that the recent decline in hardware prices for both Xbox and PS2 to $149 will start a new growth phase for this generation of hardware.

In fact in the previous generation of hardware, the volume of units sales that occurred at the $149 price point and below actually exceeded the sales volume that occurred at the higher price points.

The significantly larger installed base will lead to increased software sales in the coming quarters.

As many of you know, we have just returned from E3, and we are really excited about the products on the horizon.

Publishers are responding to the strong demand for software with titles that offer great content, more realism, enhanced graphics and better game play.

The software lineup for the third and fourth quarters of this year is even better than last year's, with titles such as Grand Theft Auto San Andreas, Half Life 2, Zoom 3, Grand Turismo '04, Halo 2 and Madden 2005, all slated for release.

These games offer phenomenal entertainment value.

They are all sequels to previous top sellers and have the potential to set new sales records for the industry.

On the hardware front, Sony not only announced the PS2 price drop at E3, but also showcased the PSP, their new handheld product.

Nintendo also unveiled its new handheld, the Dual Screen.

Both of these new handhelds feature cutting-edge functionality and we expect both to be well received by gamers.

Also we believe they target a different demographic than today's handhelds.

We expect that they will help our business, effectively smoothing the transition between the current generation of hardware and the release of the next generation of consoles.

Collectively, the new software and hardware products that we previewed at E3 will help drive industry growth both domestically and internationally.

EB's business strategy is designed to leverage this growth by focusing on three main areas, driving our domestic growth in strip center locations, accelerating our international expansion and expanding our pre-play business.

First, I'd like to discuss our domestic strip center expansion strategy.

Over the years, we've built a strong mall presence.

Now we are concentrating our domestic expansion efforts on strip centers which enable us to compete directly with mass merchants.

In addition, the strip locations allow us to reach a broader audience than our mall stores, an audience that is important to our profitability.

Strip center customers tend to be more value conscious than mall customers.

As a result, they drive business growth in the latter part of our industry's hardware cycle when average selling prices decline.

These customers are also more likely to purchase pre-played games, enabling us to accelerate the growth of this business.

Since 2002, when we began aggressively targeting strip centers, we have opened 567 of these locations.

Today strip center stores account for 46 percent of our domestic store mix and we expect that by the end of this year this number will climb to nearly 55 percent.

It's important to note that since we have opened so many stores over the past two years, nearly half of the stores in our network are still maturing and have not yet reached their peak potential.

These stores are performing very well and are achieving our expectations.

Over the next several quarters, we expect the business from these stores to continue growing and contribute significantly to our operating results.

We think this process will be further accelerated by our continued marketing and brand building efforts.

The second component of our strategy that I'd like to discuss is international expansion.

EB has a well-established international business that is thriving.

At the end of the first quarter, our international stores represented 25 percent of our total store base and generated 26 percent of our revenue compared with 22 percent in the prior-year period.

In addition to making a significant contribution to our overall results, our international locations are an important competitive for EB.

Today we are the largest specialty retailer of our kind in Australia and Canada and a growing player in Europe.

Several years ago, the European market was just emerging and many questioned whether it would ever be as successful as the U.S. market.

Today it's clear that Europe is a strong market that offers excellent opportunity for growth and is increasingly important to publishers.

Yet many European markets our under-penetrated by specialty retail stores.

EB is well positioned to benefit from these factors.

With more than 10 years of international experience, we have the knowledge, infrastructure and resources to serve these expanding markets on a broad scale.

And we have a powerful brand that is increasingly recognized in many parts of the world, setting the stage for our successful entry into new markets.

Due to our past and continuing investments in technology, we are able to manage our worldwide store network on a common platform that encompasses merchandising, point of sale, distribution and financial applications.

Our fully integrated systems give us control over each of our stores on a daily basis and enable us to track trends in different markets immediately.

These systems are also expandable to support our continued international growth.

In the coming years, we believe that the markets in Italy, Germany and Scandinavia alone can support as many as 1,000 stores.

We are fully committed to aggressive expansion in these markets.

The third and final facet of our business strategy that I'd like to review is the growth of our pre-played business.

Pre-played offers us a number of advantages; first it's a clear differentiator for mass merchants and one that lets our customers really maximize their gaming dollars.

Gamers like that they can trade in games and now music CDs for cash or for credit towards a new title.

We then market these pre-played games at lower price points, thus enabling us to be a price leader that attracts value-conscious customers.

As a result, our pre-played model builds customer loyalty.

Finally our margins on pre-played are very attractive, which improves our overall profitability.

As I already noted in the domestic market, we are building our pre-played business by expanding our presence in strip centers where pre-played sales tend to be a more popular option.

Throughout the chain, we are using our advertising and in-store marketing tools to alert customers to this value option and to encourage them to use it.

Also as I just mentioned, we have recently added the option of trading in music CDs, giving gamers yet another way to save money on new video game title.

On the international front, pre-played is an equally important differentiator for EB.

We are finding that gamers everywhere appreciate the benefits of our pre-played program.

And of course it offers EB the same benefits that we realize here in the U.S.

That sums up the basic points of our strategy.

As we execute it, we are also working hard in many other ways to support our success.

One way we are doing this is by significantly increasing our print and regional advertising and by running cross-branded promotions with well-established national providers of consumer products, services and entertainment.

These efforts drive consumer traffic and set EB apart from competitors.

We also focus on continuous operational enhancements.

These include regularly upgrading and enhancing our technologies related to our pre-sell and pre-played programs.

During the current quarter, we created a new link between our e-commerce site and our stores that allows customers to pre-order titles online and pick them up in one of their local stores.

As a result, gamers can get the products they want most while saving both time and money.

Before I turn the call over to Jim, I'd like to summarize where we stand.

Today EB is in a position of strength and we are energized about our future.

We operate in an attractive industry that offers solid growth prospects both domestically and internationally.

We have a sound strategy to leverage these trends and we are steadily advancing that strategy each quarter.

Now I'd like to turn the call over to Jim to review the details of our financial performance for the quarter and discuss our guidance for the remainder of the year.

After Jim's is finished, I have a few more remarks and then we will open up the call for your questions.

Thank you, Jeff.

I am pleased to report on our first-quarter performance that exceeded our expectations.

We continue to deliver strong video game software sales, particularly in the pre-played area.

Total revenues for the first quarter increased 23 percent to 372.4 million from 303.5 million for the same period a year earlier.

Net income was 3 million or 12 cents per diluted share.

This compares with net income of 3.2 million or 12 cents per diluted share for the same quarter last year.

Our comparable store sales for the quarter declined 2.5 percent, in line with our production.

This compares with an increase of 10.1 percent in the first quarter of fiscal 2004.

When we spoke with you in March, we noted that our strong comp store sales in the first quarter of fiscal 2004 were driven by the launch of two exceptionally strong performers, Game Boy Advance SP and The Legend of Zelda, The Wind Waker.

As we had anticipated, the software lineup for the first quarter of fiscal 2005 was lighter in comparison and the comps reflect that.

However, we did realize strong performance from several first-quarter titles, including Techno's, Ninja Gaiden for Xbox, Splinter Cell Pandora Tomorrow for Xbox by Ubisoft, and MVP Baseball 2004 and Fight Night 2004, both by Electronic Arts for multiple platforms.

I would also like to mention that while the U.S. mall environment still continues to be challenging, we posted positive double digit comps in both our U.S. strip centers stores and our European stores.

We also continue to demonstrate our leadership position in our industry by delivering strong tie ratios.

For the quarter, those were 26 to 1 for PS2, 17 to 1 for Xbox, 21 to 1 for GameCube and 4 to 1 for Game Boy Advance.

Gross margin on sales increased by 90 basis points to 26.9 percent compared with last year's first quarter.

This was driven by a shift in our merchandise sales mix in hardware to software of more than 2 percent.

Within the software category, pre-played software continues to increase as a percentage of business which also contributed to this improvement.

As expected, the gross margin increase was offset by an increase in SG&A expense as a percentage of total revenues of 100 basis points to 23.9 percent over the same period last year.

This was primarily due to the large number of new stores in our operating base and the impact of negative comp store sales in our domestic mall-based stores.

Moving on to store count, we continue to open new stores around the world.

During the quarter, we opened 104 stores and closed nine, increasing our store count to 1623 as of May 1, 2004.

This compares with 1217 stores at the end of the first quarter last year.

In the second quarter, we intend to open approximately 100 new stores worldwide and we are on track to hit our target of 400 new stores for the full fiscal year.

For the second quarter of fiscal 2005, we expect that our earnings will be in the range of 6 to 8 cents per diluted share.

This compares with last year's results of 7 cents per diluted share.

We expect our second-quarter comp store sales to be in the range of minus three to minus 5 percent.

Top titles expected to drive sales this quarter include Full Spectrum warrior for Xbox by THQ, NCAA Football 2005 for multiple platforms by Electronic Arts, Driver 3 for multiple platforms by Atari, and Spiderman 2 for multiple platforms by Activision.

We expect all of these titles to be strong performers.

Moving on to our outlook for the balance of fiscal 2005, based on the new $149 price point for both the Xbox and PlayStation 2, we believe that industry hardware unit sales for these two systems will comp positive for the balance of the year.

As we already noted, there is also a much stronger lineup of software titles that will fuel this growth in the third and fourth quarters.

Based on our industry expectations, we expect to deliver total sales growth for fiscal 2005 in the range of 17 to 21 percent.

During the quarter, we've continued to be active in our stock repurchase program and have now acquired a total of 1.2 million of the 2 million shares authorized by our Board of Directors last November.

This repurchase activity has increased our forecast of annual earnings per share to a range of $1.90 to $2 based on an average diluted share count of 24.5 million.

In closing, I would like to note that excluding the management fees earned under the terminated services agreement with the UK-based game group PLC for both fiscal 2004 and fiscal 2005, our earnings per share are expected to grow in the range of 19 to 26 percent year-over-year.

Now I'd like to turn the call back to Jeff.

Thanks, Jim.

Before we open up the call to questions, I'd like to reiterate how confident we are about our future.

We operate in an industry that has proven to be highly resilient to economic fluctuations.

In the third and fourth quarters, we are looking at a great lineup of new software titles, some of which we believe will set new sales records for our industry.

In addition to the U.S. market, many international markets are quickly expanding, offering us significant growth opportunities.

EB is in the strongest position we have ever been in and we are well-prepared to leverage all of these prospects.

We have an effective strategy, a great team of employees and a proven business model that truly differentiates us and offers gamers exactly what they want.

Operator, please open up the call for questions.

(OPERATOR INSTRUCTIONS).

Arvin Bhatia, Southwest Securities.

(No response.)

Your line is open.

Sorry, yes, just a couple of questions here.

First one relates to your second-quarter guidance.

I'm sorry I missed part of the call.

Can you speak to the guidance coming in slightly below consensus?

Is there something we should be reading into sort of the trends in the industry right now?

You know there's some chatter on PS2 software sales slowing down.

Can you speak to kind of what the immediate trends that you're seeing post the PS2 price cut?

I think it's entirely related to the timing of the new release schedule.

If you look at the titles for the balance of the year, all the big drivers are in the third and fourth quarter.

Okay.

So it's basically a timing issue, it's nothing more than that?

Right.

And then I guess a broader question, your guidance did go up, but basically because of the share count.

Although you beat the numbers for the first quarter, I guess one way to look at it is the guidance for the year didn't go up.

Can you speak to that maybe?

Arvin, at this point, we only give guidance for a quarter at a time and stand by our annual guidance.

This business, as we all know, it's very volatile in the release schedule and the timing of price cuts.

So the fact that we exceeded the first quarter somewhat had an impact; the Xbox price cut that came a little earlier than expected.

The second quarter appears to be a little less than what the street had figured out on their own based, again, on a weaker release schedule than the second quarter.

And we're still standing by our annual guidance with a very strong back half of the year, with a lower share count that did increase the expected earnings per share for the year.

Got it.

But Jeff, what about -- going back to the PlayStation 2 question real quick, are you saying that then there's really nothing to worry about as far as this PlayStation software trends are concerned.

And maybe if you can talk about the first week following the price cut if there is anything to be read into the trends there?

No, again, the current PS2 software sales I think are directly related to the strength of the current release schedule and you know if you look at the titles -- some of the key titles coming out in the third and fourth quarter, Grand Turismo '04 and San Andreas in particular are both PS2 titles.

So we expect to see a stronger trend in PS2 software sales in the back half of the year.

In terms of the reaction to the price drop, we've seen a significant increase in unit sales in this first week.

I think it's in the range of 60 percent over last year.

So we were very pleased with that.

We are very pleased with that.

I think that bodes well for hardware sales, particularly in the holiday seasons because this is the strongest price point that we've ever been at.

As we said before, in the last cycle, unit sales really accelerated once we got to the 149 and then the 129 price points.

Sixty percent, now that's impressive.

Now are you then saying that yes, hardware is up but software not up as much because lineup isn't as great.

Is that -- am I understanding you correctly?

The units are up, the hardware units, but I don't think we're going to hold to that 60 percent increase throughout the quarter.

It will start to decline.

I think our assumptions were that units would be up, the dollars would be down in the balance of the year for all -- for PS2 and Xbox.

And we expect GameCube units, probably -- units and dollars to be down to last year.

I guess what I meant was software sales on PlayStation 2.

The increase you might be seeing there, you know is that comparable to sort of the unit increase in hardware?

There's always a lag, I imagine in the software sales --?

Yes, there absolutely is a lag.

We're not currently seeing that kind of an increase in software sales, no, but that will come.

That will come as the release schedule gets stronger.

I wouldn't read anything into current you know perceived weakness in PS2 software sales.

I think it's directly related to the strength of the current release schedule.

Got it.

And then on the mall side, can you speak to how much weakness you're seeing versus last quarter?

I mean the environment is challenging but are you saying any signs that suggest that maybe things are stabilized and you know, at some point they're going to start getting better?

Mall comps are down and strip comps are up.

And we expect that trend to continue.

It'll both of these should pick up in the back half of the year, Arvin.

The malls are our most mature store base and we haven't really opened any malls in the past a few years.

It's all been strip store expansion domestically for the most part.

And those stores are suffering certainly from the average decline in selling prices both on the hardware as well as to some extent in software.

And pre-owned business is increasing within those stores, and while it's highly profitable, the average selling price on pre-owned business is in fact less than front-line titles.

So we're happy with the profit performance but the top line is a bit challenged and that should pick up in the back half of the year when we get a very strong release schedule and that will drive business back into even the mall stores, I would expect.

Got you.

And that's the inflection point, you know Q3, Q4 over in that timeframe?

Yes.

Okay.

And just a quick question, you know we just saw that there was some discussion from Warner Home Video on one of their movies there.

Is there anything to be concerned about on Lord of the Rings?

No.

I mean how much business do you guys do with them?

Virtually nothing.

Got it.

Thanks, guys.

Tony Gikas, Piper Jaffray.

Hey, good afternoon, guys.

Hi.

Arvin left a couple of questions I guess.

You may have said this on the call and I think I missed it.

Did you give a breakdown or the approximate increase in comp store sales for the software piece of business alone?

And maybe could you just maybe characterize the growth in new versus used software?

I know you don't give (multiple speakers)?

No, we did not give that and we don't plan on giving that.

I will say that software comps were positive.

And you know the used portion of the business grew faster than the new.

Okay.

And a couple other questions.

The music CD business, what prompted you to get into that piece of business?

How big can it be?

How long does it take to evolve?

Then a couple quick follow-ups after that.

That was really just primarily the case of customers asking for it.

So we experimented in a few districts and found that it was very attractive and that there was a market for it.

And it really it gave -- it was another way to build loyalty.

We don't really at this point in time don't expect it to be a major sales driver but it's a great way to build traffic and bring some repeat business in.

We're really using it to drive the sales of new release games.

Okay, and you have the shelf space for it, no concern there?

Most of it it's not staying in the stores.

Okay.

And how about, do you expect price cuts on the hardware systems in Europe on an international basis anytime soon, is that factored into your guidance?

Our expectation is that there will be another round of price cuts in Europe before the holiday season.

But we don't have any specific information on that yet.

I would say yes it is built into our guidance.

Okay, thanks, guys.

Edward Williams, Harris Nesbitt & Gerard.

Good afternoon.

A couple of questions, could you let us know how your international stores performed on a comp basis say relative to the strip and relative to the mall-based stores in the U.S.?

The international stores comped positive.

Europe was double-digit comps.

I don't think we're going to give any more specifics on that, than that.

Okay.

Can you characterize -- you had mentioned that the strips were positive.

Can you characterize if they were more positive or less positive than the strips?

Actually said they were double digit --

Right.

Positive comps in strips in the U.S.

Okay.

How about a store breakdown between strip, mall and international?

We have that. 654 mall, U.S. mall; 567, strip; 402, international.

And then looking at the 300 or so stores you're going to add in the balance of the year, how will that likely flow into these three categories?

Roughly about 3/4 of them will be U.S. strips and the balance international.

Most -- Europe will have the largest number of international.

Okay.

And then, Tony had asked about the software comps.

How about hardware unit comps, how did those perform in the first quarter and how are you thinking those will perform in the second quarter?

Hardware units were up.

GameCube was down.

Xbox was up.

In PS2 was down slightly, almost flat.

Game Boy Advance was up slightly.

I don't have a breakout of comp hardware;

I would say that they were probably slightly positive.

Okay.

And then, looking back to the European market for a moment, how is the profitability for your European stores at this point?

And when do you expect profitability to occur?

Our forecast for the full year is to be profitable at the operating line in Europe.

Certainly it won't happen in the earlier part of the year as they are trying to cover operating costs.

But they did perform ahead of the original budget in the first quarter, not significantly but they were ahead of expectations in the first quarter.

So we're very pleased with how Europe is coming along.

Okay.

And then just to clarify one more point, the 1.2 million shares of the buyback, is that through today?

Yes.

Okay.

And what was it through the end of the quarter?

Let me see if I can give you an estimate.

I don't have the number off the top of my head.

We'll get back to you.

I will have it by the end of the call.

Okay.

And then the last question for you is cash flow from operations for the quarter, can you give us any color as to how that was?

Yes.

Actually cash from operations was down 50 million.

We spent about 10 million on CapEx and about 17 million in the stock repurchase.

The total cash was down 76 million.

The big driver of cash from operations were accounts payable and income taxes and accrued expenses and some for the inventory increase.

Okay.

Good, thanks, a lot.

Bill Lennon, WR Hambrecht.

Hi, guys, first before I get to my question just a clarification.

Did you say software comps were positive in the quarter?

I don't know if we said it or not but they were.

Okay.

On the hardware, do you foresee hardware becoming less a part of your revenue mix as strip malls increase?

And I guess another way to ask that is, is hardware a lesser part of the mix in strip malls than it is in malls?

It probably won't be as dramatic a decline as we experienced in previous cycles.

When we were strictly a mall-based retailer, hardware did decline pretty significantly towards the end of the cycle because the consumer driving hardware sales at that point was primarily a more value conscious consumer who was typically not a mall customer.

So what we found is that hardware has not declined in relation to percent total of our business the way it did in the previous cycle.

So our assumption is that where it is now in the midteens is probably about where it will stay.

Okay.

Do you have a guess for the upcoming quarter what that number will be?

Lower, up or down from this quarter?

I'd say probably similar.

Okay.

One other thing about -- I have one other clarification here.

I will have to ask you offline, I don't have the question.

That's it for me.

Thank you.

As a follow-up to Ed's question on the share buyback, it was over 450,000 shares were purchased, post the end of the quarter.

Next question.

(No response.)

Operator?

Paul Kaump, Dougherty & Company.

Hey, guys, quick question for you.

Out of the nine stores that closed, how many of those were mall locations?

I believe eight of the nine were.

Eight of the nine?

Okay.

With respect to the malls and strips in the U.S., what sort of cannibalization have you guys been seeing?

And if there is a significant cannibalization, do you expect that you're going to be closing more mall locations given that's where a lot of the weakness seems to be right now?

There is some cannibalization and we expect that to continue.

If we did not open these strip stores, we still believe that the malls would be experiencing negative comps.

Part of our long-term plan was that -- our assumption was that we were going to be more aggressive in mall closings.

But what we found is as leases come up for renewal, we've been able to -- even with forecasting continued flat or even decline in sales in those locations, we've been able to negotiate favorable terms to stay and continue to get very acceptable returns out of those locations.

So for the most part, we've been choosing to renew.

Now that does create some comp challenges but we feel that the increased store base and some of the other benefits that we get from that more than offset the greater comp challenge that that might create for us.

Okay.

Last question, with respect to inventory, it was up on a quarter-over-quarter basis.

I know last year we saw it down significantly.

You know what would you comment as far as -- or how would you comment with respect to how the inventory looks overall?

And I realize you're operating significantly more stores, but last year we also had a pretty high-priced unit.

We were somewhat disappointed with where we ended up at the end of the quarter with inventory.

You'll see a decline in that in the second quarter.

Okay.

Are there any areas in particular that are causing you problems right now?

No, no.

It's about pretty much evenly divided.

No concern.

It's not necessarily problem inventory, it's just a little heavy in some front-line products, both software and hardware that'll sell through.

I'd like to point out that last year's significant drop, we admitted coming out of the holiday season in 2002, that we were significantly over-inventoried at the end of the year.

We worked through that in the first quarter of last year and completed that balancing into the second quarter of last year.

So that's why you had such a dramatic drop last year.

It was coming out of a very weak holiday season the year before.

Okay, all right.

Thanks.

Bill Armstrong, C.L.

King & Associates.

Good afternoon.

A couple questions, with strip center and European store comps up double-digits, how negative were your U.S. mall comps?

We're not going to break it out that specifically.

They were single digit decline.

Okay.

And negative comps for Q2, is that a function just of what you see as a kind of light software release schedule?

Or are you also looking for the price cut on hardware to more than offset the unit increase in hardware?

Yes, it's a combination of those two things.

The lineup in software is relatively light in relation to what we're going to see in the third and fourth quarter.

And the decline in hardware pricing will be -- have a bigger impact than the increase in unit sales.

Okay.

Gross margin for the first quarter, I thought I heard you say, Jim, in your opening comments that the hardware to software mix was favorable to gross margins.

But I see hardware was 17 percent versus 15 percent a year ago and other high-margin categories like accessories were down.

Did I get that right or (multiple speakers) could you walk us through that?

Yes, it really was more of an impact in the growth of the used business that gave us the favorable increase in margin.

Okay.

So the hardware/software mix sounds like it would be unfavorable.

Is that --?

Right, but there's used -- used is mixed into the hardware and software totals.

Oh, okay.

So it sounds like margins within the categories were up because of the used component.

Yes.

Okay.

And then just for housekeeping, how many shares were actually outstanding on the balance sheet at the end of the quarter?

One second.

That's the average.

In our 24.9 total, 24.5 were the basic shares.

But that was the average for the quarter.

I don't have the actual number as of May 1 itself.

But our expectation for the second quarter is 24.3 in that earnings per share guidance.

Right.

And then the 450,000 shares that you mentioned before, that was repurchased after the end of the first quarter?

Yes.

Okay.

And so obviously that's included in your projection for the second quarter, then?

And the remainder of the year.

And we still have under the original plan authorized another 800 million shares available if we were to continue making purchases.

But none of that was factored into any of the guidance for the rest of the year at this point.

Right.

Okay great.

Thanks.

John Taylor, Arcadia.

Hi, I got a couple of questions as well.

Right now we've got two PS2 SKUs priced at 149, one fit (indiscernible) the network adapter, the other is core system.

What do you guys think Sony is going to end up with at the end of the year?

Are we going to have a core, are we going to have a network bundle?

That's the first one.

The second one is the -- I don't think you gave us a comp assumption for the full fiscal year.

I wonder if you could throw that out there for us.

And do you assume positive or negative comps for your three main store baskets?

And then the third question is, how are you thinking about the shift of consumer demand from PS2 sports titles, say EA sports titles, because they are on Xbox live this year as opposed to last year?

I'm wondering if you think that's going to grow the market or whether PS2 owners just shift over to the Xbox, how you think about that?

Thanks.

I don't think I'm going to remember all those questions but I'll try.

The first one was on the hardware.

The indication from Sony was that the core system would be the survivor system, that network bundled would be sold through and then that would be done with it.

Our comp guidance for the year remains unchanged, that what we gave out at the end of the year call was positive 2 to 4 percent for the year.

And I don't remember what your other questions were.

Well the other one was primarily, does the Madden say on XBox (multiple speakers) the market?

Right.

How are you thinking about that?

You know that's an interesting issue.

I think on the one hand, you figure all the Microsoft sports sales will be replaced by the EA, so that's an automatic plus for EA.

I have to assume that for households that have cross-ownership of PS2 and Xbox, there might be some cannibalization of the PS2 version moving over to the Xbox version if the user likes live better than the PS2 network.

But I think it's a net gain.

So if you were to ignore Microsoft's pulling out as first-party publisher and just look at you know an EA property like NCAA or Madden or anything, before you knew that they were playable on Xbox live, you might X units.

What's the delta between that and the new number now that you know there will be an Xbox live? (Multiple speakers)?

We don't need to make that decision yet.

We have the luxury of waiting to see how the pre-sells develop.

My guess is that there'll be some cannibalization of the PS2 business.

We'll still see growth in PS2 but probably not as much.

But you know again, we don't have to -- that's one thing we don't have to guess yet.

Okay, that makes sense.

Let me ask one more.

Are there any titles that are kind of moving with a high attach rate -- higher than average attach rate -- to the hardware at the lower price, anything in particular benefiting (multiple speakers) --?

No, nothing that we've seen yet.

I think that there might be some potential for some of the releases next month -- a good candidate for that might be Full Spectrum Warrior; that might get a bump from the drop.

We haven't seen anything else yet.

Yes, okay.

Thank you.

Okay.

Thanks for joining us this afternoon.

We appreciate your support and confidence in Electronics Boutique.

Thank you.

This concludes today's conference call.

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