During the second half of 2005, GSI Commerce explored an acquisition, which it decided not to pursue after completing a due diligence effort in December. The decision resulted in a cost of approximately $1.5 million, which added to a provision for income taxes and fees related to the restatement of previous financial results, ultimately cost the company $2 million to its bottom line. Nonetheless, GSI was able to translate a 27% revenue jump to a respectable 16.8% net income increase for Q4.
Net revenues were $172.3 million in the fourth quarter, a 27% increase compared to $135.6 million in Q4 2004. Merchandise sales were $282.4 million, a 42% increase compared to $199.3 million in the year-ago period. Revenues from sales of Sporting Goods were up 37.8% to $93.1 million. The company picked up 10 new partners during the year, but management said that sales growth was “fairly well-balanced between existing and new [partners]” for the quarter.
Gross margin was 43.1% of sales in Q4, an increase of 220 basis points from Q4 2004. Gross margin as a percentage of merchandise sales was 27.4%, up 90 basis points from last year. Net income was $11.7 million a 16.8% increase from income of $10.1 million during last years fourth quarter. Earnings were 25 cents per diluted share in the fourth quarter of fiscal 2005 compared to 23 cents per diluted share, in the same period in 2004.
For the first quarter of 2006, GSI expects net revenues to increase between 11% and 16% to the $101 million to $106 million range. Merchandise sales are seen in the range of $176 million to $181 million, up 29% to 33%, while product sales are expected to be in the range of $80 million to $85 million, an increase between 4% and 11% for the period. The net loss is expected to be in the range of $3.0 million to $4.0 million for the quarter. For the full year 2006, GSI expects net revenues to be in the range of $530 million to $550 million, or an increase of between 20% and 25%. Net income is expected to be in the range of $5 million to $10 million, or an increase of between 92% and 285%.
| GSI Commerce, Inc. | |||
| Full Year Results | |||
| (in $ millions) | 2005 | 2004 | Change |
| Total Revenues | $440.4 | $335.1 | 31.4% |
| Sporting Goods | $212.9 | $164.5 | 29.4% |
| Other Sales | $142.4 | $110.5 | 29.0% |
| Merchandise GM | 25.8% | 26.0% | -20 bps |
| Net Income | $2.7 | ($0.3) | vs. loss |
| Diluted EPS | 6¢ | (1¢) | vs. loss |
| Inventories* | $34.6 | $37.8 | -8.4% |
| Accts Payable* | $58.7 | $58.0 | +1.2% |
| * at year-end | |||
