Monday, video-game and entertainment software retailer GameStop Corp. (GME), announced its capital allocation plan for the fiscal year 2010, which will provide ample investment capital for continued aggressive new store expansion worldwide and allow GameStop to enhance shareholder value through a $300 million share repurchase program approved by its board. The company noted that the capital allocation program does not have any specific limitations and may be suspended or terminated at any time.
The Grapevine, Texas-based company said that the impact of the entire $300 million buyback at current share price would result in accretion to earnings per share of approximately 10%.
GameStop said that over the past three years, it has generated sufficient cash flow to fund the opening of almost 2,000 new stores, redeemed $500 million dollars in long-term debt, and completed the acquisition of Micromania for $580 million.
The company estimates cash from operations of $600 million and $200 million for opening of 400 new stores and other capital expenditures. The expected reserve for acquisition activity is $100 million. GameStop believes its cash flow will remain at or above existing levels for the year ahead and believes the video game industry and the company will continue to grow in the years to come.
Gamestop expects to end fiscal year 2009 with $700 million of cash on hand and, assuming similar levels of cash from operations as generated in fiscal year 2009, the company should end fiscal 2010 with $700 million of cash after having executed the capital allocation program
GME closed Monday's regular trading session at $20.32, up $0.03 or 0.15% on a volume of 6.87 million shares on the NYSE. In the after hours the stock further rose 2.02% or $0.41 trading at $20.71.
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