Greetings, and welcome to the GameStop third quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator or technical assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Eric Cerny, investor relations. Thank you, Mr. Cerny, you may begin.
Thank you, and welcome to GameStop's third quarter fiscal 2020 earnings conference call. This call will include forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Any such statements should be considered in conjunction with the cautionary statements and the safe harbor statement in the earnings release and risk factors discussed in reports filed with the SEC. GameStop assumes no obligation to update any of these forward-looking statements or information. A reconciliation and other information regarding non-GAAP financial measures discussed on the call can be found in the earnings release issued earlier today, as well as the investors section of our website. With me today are GameStop's Chief Executive Officer, George Sherman, and Chief Financial Officer, Jim Bell. On today's call, George will share insights into our business and strategic framework for the future.
Jim will then provide more detail on our financial results and expectations for fiscal 2020. We'll open the call to take your questions. Now, I would like to turn the call over to the company's Chief Executive Officer, George Sherman.
Thank you, Eric. Good afternoon, everyone, and thank you for joining us today on our third quarter earnings call. I hope you're all safe and well. The third fiscal quarter represents a key pivot point in our trajectory to stabilize, optimize, and transform GameStop. We have made significant strides in stabilizing and optimizing our core operations and are excited about the transformational plan we are executing that will enable us to create long-term value as our industry continues its rapid growth. Our third quarter results were largely as we had anticipated, marking the end of a challenging sales performance period as the industry transitions from Generation 8 to Generation 9 console video gaming products.
The transition, coupled with the impact of a global pandemic on consumer retail mobility, and also to some extent, supply chain disruptions, is now segueing into what we see as a period of sustained growth, the beginnings of which I'll highlight in a moment. First, to summarize the third quarter. As we had anticipated, sales and profitability were down, with comparable store sales declining 24.6% and an adjusted loss of $0.53 per share. That notwithstanding, we saw 257% growth in our e-commerce sales versus the prior year, reflecting investments during the year that enhanced our omni-channel capabilities. We continued to reduce expenses, delivering over $315 million in SG&A expense reductions so far this year. We are pleased to end the quarter with almost $300 million more in cash and restricted cash compared to the end of the prior year third quarter.
As I mentioned, we've made significant strides in stabilizing and optimizing our core operations over the last 15 months and are excited about the plan we are executing for the rapid evolution of GameStop. Despite the unprecedented environment during the global pandemic, our strong performance in November shows not only where we are, but the rapid pace of our transformation, beginning with the cost reductions and significantly improved balance sheet delivered by our ongoing work, followed by the console launch in early November, and now our focus on key transformational strategies that will power future growth. Our goal is simple. We are positioning GameStop to be the leading global omni-channel retailer for all things gaming and entertainment.
We are encouraged by our successful efforts in 2020 to begin category and product extensions that increase our addressable market, as well as by our customers' early response to an expanded products and services offering. At the forefront of this strategy is a digital-first approach focused on delivering a best-in-class e-commerce experience along with an optimized retail footprint. Together with enhanced fulfillment options, they provide our customers with the most comprehensive set of games and entertainment products and events wherever, however, and whenever they want them. The current console-based video games products are an important element of our strategy over the next few years, and we realized a very successful launch of the next generation products in November, driving 16.5% growth in comparable store sales.
This was the first positive comparable store sales month in nearly two years, despite being closed on Thanksgiving Day in North America and the ongoing negative impact of COVID-19, which saw the closure of the vast majority of our European storefronts for the entire month. In addition to the appeal of the next generation of consoles, these results also reflect the significant improvements we have already made to the performance of our omni-channel platform as global online sales in the month of November grew 352%. In line with these early results, we expect to generate strong sales growth and profitability in the final quarter of the year. Let me review some of the additional highlights for the third quarter.
Jim will share some of the specific details of the quarter, but broadly speaking, our global store fleet saw on and off periods of store closure or restricted access to customers, particularly as COVID-19 cases accelerated around the world in October and then through November. We believe the pandemic, and importantly, the depression of retail consumer mobility, lowered our comparable sales in the third quarter by three to five percentage points. Pivoting to our strategic accomplishments in the quarter. We continue to optimize our core business by improving efficiency and effectiveness across the organization, leading to a reduction in SG&A expenses of nearly $115 million for the quarter, bringing our total for the year to over $315 million versus 2019, roughly two-thirds of which we view as permanent. We continue to work quickly to optimize our omni-channel capabilities through the transformation of our physical store presence.
Through the third quarter, we have closed almost 800 stores worldwide since the beginning of 2019, representing both underperforming locations and de-densification in certain trade areas. We expect these closures to create a more profitable footprint. In the U.S., we continue to see strong sales and profit transfer to neighboring locations and e-commerce, an important point in supporting the continued optimization of our store fleet. Consumer affinity for our continually improving e-commerce experience and the ease of shopping and same-day delivery of our omni-channel fulfillment is increasing efficiency across our store footprint. By the end of the fiscal year, we will have closed over 1,000 stores since we began this optimization journey in the middle of 2019, all with little to no capital outlay.
Given the strength of our e-commerce sales and omni-channel capabilities, which I'll comment on momentarily, we now see the opportunity to close additional stores going forward in 2021 and 2022, as we optimize the profitability of an omni-channel architecture. Overall, our goal is to serve our customers wherever, whenever, and however they choose to shop. We continue to improve our balance sheet. We again improved working capital management with a 33% reduction in inventory and a 38% decline in accounts payable, ending the period with $603 million of cash and restricted cash, about $300 million more than the prior year third quarter. Finally, as a result of the continued strength of our balance sheet, we further enhanced our capital structure with the announcement of a voluntary early redemption of $125 million, or approximately 63% of our outstanding notes due in 2021.
As you know, we remain very committed to our efforts to build a frictionless, digital-first omni-channel ecosystem, and our customers are responding, significantly changing the way they shop with us. Our focus on customer centricity and the best end-to-end customer experience has led to recent material gains in our e-commerce business, and we expect to build on this success, reinforcing the core focus of our go-forward strategy. In the third quarter, we delivered a 257% increase in e-commerce sales versus the prior year, fueled by our elevated omni-channel capabilities. E-commerce penetration continues to grow and represents nearly 25% of total sales this year, up from a low single digit percentage historically.
We are also leveraging our expanded fulfillment capabilities, such as curbside pickup, buy online pickup in store, ship from store, and in the third quarter, we rolled out same-day delivery for online transactions to 2,000 locations, and now have that option available in all of our U.S. stores. Given our relatively high average transaction size, we can profitably partner with last mile delivery services to provide customers with same-day delivery. Our new mobile app, which launched fully in October, is much more engaging than the previous version and provides newly available functionality and a dramatically improved customer experience. The app is customizable, enables customers to personalize features, select same-day delivery options, and browse a curated deal hub.
With more people downloading and using the app on a weekly basis and engaging with it for longer periods of time, we've seen a significant increase in engagements leading to transactions, a 30% increase in conversion. With the increased usage, e-commerce sales originating from the app have now doubled. We are very pleased with the initial performance and look forward to rolling out additional features such as the gamer news feed and a comprehensive, easy-to-use digital wallet in early 2021. Going forward, you will see us leverage our GameStop ecosystem of stores, e-commerce, and our app to deliver an enhanced 360-degree experience for consumers with products and services that are more relevant to how they connect and play on devices today and in the future. All with a focus on driving customer lifetime value.
These efforts have already resulted in, and we believe will continue to lead to, higher conversion, basket size, frequency of purchase, as well as a new customer acquisition for our PowerUp loyalty program. As you appreciate, these are very encouraging metrics. The progress we made during the quarter on our strategic initiatives, despite the COVID-19 backdrop, largely completes our optimization and stabilization phases of our strategy, which we've been working on for over the last 15 months, and positions us for the next phase, transformation. Before discussing our future plans and opportunities, I'd like to quickly review the material accomplishments that we set out to achieve with the launch of GameStop Reboot just 15 months ago. In that time, we optimized our physical store presence through the ongoing de-densification and will have closed over 1,000 stores by the end of 2020.
We exited unprofitable businesses in the four Nordic countries and divested of the Simply Mac business unit. We continue to take cost out of the business, significantly reducing SG&A by $316 million year-to-date and over $440 million from our starting point in the middle of 2019. We increased productivity with an improved store labor strategy, invested in our e-commerce platform, driving 433% growth in the channel to nearly 25% of sales year-to-date. We improved inventory management with faster turns, delivering well over $300 million in working capital benefits, key to our ability to deftly navigate this pandemic. We monetized several assets, including the sale leaseback transactions for five office buildings and the sale of our corporate jet, adding over $95 million in liquidity.
We enhanced our financial flexibility with the completion of an exchange offer and consent solicitation for $216.4 million of our unsecured notes, reducing the amount due to mature in March 2021 to approximately $198 million, of which we have already announced the voluntary early redemption of $125 million. By March, we'll have reduced the overall debt on our balance sheet by almost $600 million since early 2019. We repurchased 38.1 million shares since the spring of 2019, approximately 37% of shares outstanding at the time, at a weighted average price of $5.21. We significantly expanded our customer payment options, including elevated focus on our private label credit card, adding several buy now, pay later options, and launched rent-to-own options to complete the payment stack.
As we enter the fourth quarter, we have several tailwinds that set us up to win during this holiday season, starting with the new console cycle and including our digital omni-channel acceleration. To be clear, we are not just focused on the console video game market, and we're expanding the spectrum of products and services we sell to position GameStop to be a worldwide leader of games and entertainment for our customers. As many of you have seen, we have begun to expand our SKUs to include PC gaming, computers, monitors, game tables, and gaming TVs, to name only a few categories. Many of these SKUs will continue to be online exclusives. PC hardware and accessories represent a major market opportunity, and industry research by NPD shows that the large majority of console gamers also play PC games.
Our overarching goal is to leverage the power and competitive advantages of our brand, significant loyalty base, dedicated and experienced sales associates, and expansive omni-channel capabilities to drive lifetime value across all things games and entertainment. As customers evolve the way they play, we are evolving with them, expanding our addressable market as we expand our suite of products and services to meet their needs. In closing, as we look back over the five quarters since launching GameStop Reboot, we are very proud of the tenacity of our teams to not only produce meaningful results during the stabilize and optimize stages of our plan, but to do so all while delivering our products and services to our customers, and doing so in the middle of an unprecedented business disruption caused by the global pandemic.
We have made advancements that have begun to return our business to sales growth and profitability while enabling us to undertake the significant transformational work we now have underway. As we look to next year and beyond, we are confident in our strategic plans and the transformation of improved results and long-term sustainable growth at GameStop. Now, let me turn the call over to Jim to discuss our financials in more detail.
Thank you, George. Good afternoon, everyone. I'd like to take this time to walk you through our third quarter fiscal 2020 results, and then I'll share some insight into the success of the new video console launch and how we're approaching the fourth quarter. As George discussed, we advanced our strategy in the third quarter, making significant progress on our near-term goals of optimizing our core business by reducing expenses, improving our inventory management, and strengthening our balance sheet and capital structure. We did so while continuing to focus on transforming GameStop for the future to deliver profitable long-term growth.
With the third quarter behind us, we are intently focused on maximizing all that the new console cycle has to offer, expanding our foundational work on our elevated omni-channel platform and more efficient operating model, and quickly but methodically evolving the business to expand our addressable market and support our long-term growth and profit objectives. As the gaming consumer and industry evolve, we see an opportunity to expand our addressable market beyond our historical predominant focus on the console video game market with a comprehensive suite of product offerings and new services across all categories for games and entertainment. Simply put, we're making it easier for consumers to find what they need at GameStop in an intuitive, relevant, and frictionless shopping experience, all while taking a leadership role across the game and entertainment categories.
Economically, this means adding incremental purchase occasions with higher margin lines of business and therefore capturing greater share of wallet. Let me turn to a review of the third fiscal quarter. As George mentioned, our third quarter sales performance was as expected as we transition through the final quarter of the Generation 8 console video game cycle, which included the shift of many software titles into the fourth quarter this year and even into 2021. Further, we realized some top line softness in October as COVID-19 case spikes drove retail consumer mobility down. Our consolidated global sales for the third quarter was $1 billion, or 30.2% below the third quarter of 2019.
The decline was the combination of a negative 24.6% comparable store sales, the impact of both store closures and lower retail customer mobility through most of our operating countries, and the impact of operating 607 fewer stores as part of our strategy to exit unprofitable businesses and optimize our store fleet through dedensification. We continue to see strong sales and profit transfer rates from that dedensification strategy. Geographically, our Australia and New Zealand business unit continue to perform very well relative to other regions, delivering a slight increase in sales for the quarter. It is important to note that performance in this region is driven by very little reduction in store operating days, as the COVID-related retail operating mandates have generally not required full closure or limited access, except for short periods of time. In terms of category performance, hardware and accessories declined 24% for the quarter.
An expected slight deceleration from the second quarter, largely reflective of a lack of hardware product in the marketplace ahead of the launch of the new consoles, much of which was pulled forward into the second quarter. Despite this, Nintendo Switch continued to perform extremely well, increasing significantly compared to last year, and we continue to leverage our pre-owned inventory to drive sales. Software was down 39% for the quarter versus 2019, a deceleration from the second quarter, and was driven by the lack of title launches, most of which shifted later into the fourth quarter and into 2021. Notably, Call of Duty launched in the third quarter of last year compared to the fourth quarter of this year.
Our collectibles business was down 9% for the quarter, which represents a significant improvement sequentially from the second quarter performance, as we realized the benefit of store traffic as stores began reopening during the quarter after being closed during the second quarter. From a product margin standpoint, overall gross margins declined as the increase in the mix of higher-margin collectible sales was more than offset by the mix of lower-margin hardware sales and an increase in industry-wide freight costs and credit card processing fees, driven by our higher penetration of e-commerce sales. Our overall global gross margins were 27.5%, down 320 basis points from our more software-led 30.7% in the fiscal third quarter last year. Now turning to our expenses and expense management objectives. Our reported SG&A expenses were $360 million, reflecting a decline of approximately $115 million or 24% versus the reported SG&A in the third quarter last year.
The total year-to-date SG&A cost reductions reached over $315 million at the end of the third quarter, ahead of our expectations. Importantly, we continue to expect about 2/3 of these reductions to be permanent, reflecting our ongoing efforts to aggressively rationalize the overall cost structure of our business. While we expect some of these variable costs to come back in future quarters as we return to more normalized operations of our stores and distribution centers, we are also steadfastly focused on further operational efficiencies to create additional permanent expense reductions in the future. To this end, we have more than doubled the original annual cost reductions we expected as a result of these actions we took as part of the Reboot initiative, which began in 2019. We reported an operating loss of $63 million, compared to an operating loss of $45.6 million in the prior year third quarter.
Income tax in the third quarter was a benefit of $53.9 million, driven by a change in the tax status of certain foreign entities that we have elected and the impact of the CARES Act, which allowed for a five-year carryback period for certain current-year tax losses. This tax benefit compares to an income tax expense of $31.6 million in the prior year third quarter. Our effective tax rate for the quarter was 74.1%. On a reported basis, our net loss was $18.8 million, or a loss of $0.29 per diluted share, compared to a net loss of $83.4 million, or loss per diluted share of $1.02 in the prior year third quarter.
Adjusted net loss, excluding the gain on sale of assets related to the sale-leaseback transactions, was $34.4 million, or a loss of $0.53 per diluted share, compared to adjusted net loss of $40.2 million, or $0.49 per diluted share in the fiscal 2019 third quarter. During the third quarter, we continued to focus on optimizing our global store fleet and strategically dedensifying certain markets. For the quarter, we closed a net total of 74 stores, bringing our total to 461 closures year-to-date. At the end of the quarter, we operated with 5,048 stores, or 607 fewer compared to the end of the third quarter last year.
Given the strong sales and profit transfer rates we continue to experience, we are on track to close nearly 700 stores in total this fiscal year and over 1,000 stores worldwide since we began this part of our strategy in 2019. Importantly, we are completing these closures generally with little to no capital outlay to do so. Turning to our balance sheet, which continues to be an area of focus for the team. At the end of the fiscal third quarter, we had total cash and restricted cash of $602.6 million, almost $300 million higher than the end of the third quarter last year, reflecting our continued efforts to optimize working capital. During the quarter, we completed the sale-leaseback transactions for the remaining two office buildings being offered, contributing $43.7 million toward total liquidity.
Accounts payable at the quarter-end were $440.2 million, down from $709.9 million at the end of the third quarter last year, reflecting a 38% reduction, which is directly related to our ability to leverage a flexible supply chain and improve our inventory management. We ended the third quarter with total inventory of $861 million compared to $1,286.7 million in the prior year period, a reduction of 33%. Inventory efficiency in the third quarter continued to improve as we realized a trailing 12 months inventory turn of 4.7x from 4.1x this time last year. During the third quarter, we've reduced outstanding borrowings under the asset-based revolving credit facility by about $10 million, down to $25 million outstanding. At the end of the third quarter, we had $269.5 million of short-term debt and $216 million of long-term debt on the balance sheet.
Subsequent to the quarter end, we announced the voluntary early redemption of $125 million in principal amount of our 6.75% senior notes due 2021. The redemption will take place on December 11th, 2020, and covers approximately 63% of the outstanding '21 notes. The voluntary early redemption is consistent with our actions to strengthen and enhance our balance sheet, improve our debt profile, and optimize our capital structure. In the third quarter, we had $15.1 million of capital expenditures, and we continue to focus our capital spending on near-term, high-value strategic projects and mandatory maintenance, and still anticipate that we'll invest approximately $60 million-$65 million in CapEx for the year, some of which is offset by our various vendor support programs. Separately, today, we also filed a shelf registration statement and established a related optional at-the-market program to offer and sell up to $100 million of additional common stock.
As I noted several times this year, we are extremely pleased with the results we have achieved to strengthen our balance sheet and advance our strategic objectives, and believe we have more than sufficient liquidity and balance sheet strength to continue to execute on these endeavors as well as navigate through any potential unknown or extended pandemic effects. As such, the timing and amount of sales of shares under the program, if any, will depend on a variety of factors including prevailing market conditions, the trading price of shares, and other factors we may determine.
However, as a pragmatic matter, initiating this program provides us with the maximum flexibility and optionality to further bolster our balance sheet and liquidity position, and increased flexibility gives us the ability to leverage opportunities to accelerate our transformational strategies, such as increasing the speed at which we elevate and expand our omni-channel strategy while further ensuring minimal disruption from any potential further pandemic impacts around the world. Before moving to our fourth quarter outlook, I want to spend a few minutes highlighting the initial results of the console launches that occurred in November. By all accounts, these consoles are experiencing unprecedented demand, and we continue to work with the suppliers to meet that demand.
Importantly, we continue to be able to achieve attachment rates for first-party and third-party software and accessories that are, in most cases, more than two times that of any other competitor, which is leading to us having opportunities to get additional allocations for these high-demand consoles. Given the strength of our performance so far with the console launch, we expect strong sales growth and profitability in the fourth quarter, something we have not seen in quite a few quarters. As George mentioned, November comparable store sales increased to 16.5% despite the impact of store closures throughout most of Europe and part of Canada in November. In addition, our customers continue to respond favorably to our improved e-commerce experience, including our new app and flexibility of new fulfillment and payment options provided within our elevated omni-channel ecosystem.
As a result, year-over-year e-commerce sales grew 352% in November versus the same month last year. Despite the strong start to the fourth quarter, given the uncertainty around the evolving impact of COVID-19, we are continuing to suspend guidance. As we mentioned, we have seen varying levels of closures across our international operations, particularly in Europe, and as things remain very fluid in the U.S., temporary store closures due to COVID-19 could be likely heading into the rest of December and January. Keep in mind that the comparable store sales exclude the impact of permanent store closures and locations that have closed 14 contiguous days or more due to the pandemic. Before I conclude, I wanted to elaborate a little further on our real estate strategy and efforts to optimize our fleet, especially dedensifying overstored markets and how we're approaching further actions.
Looking at 2019 and 2020 combined, we will have closed over 1,000 stores over that timeframe with over 300 in 2019 and nearly 700 in 2020, importantly, have spent little to no capital to do so. With our investments in improving our omni-channel capabilities, including hiring almost 30 professionals with extensive digital experience, coupled with the impact that COVID-19 has had on our customers' desire to experience GameStop across our digital platforms, we see an opportunity to further optimize the fleet in the coming year or two. These efforts come with EBITDA improvement. We have had a very flexible store base in terms of lease expirations. That will enable us to close stores at very little cost to the business. We will update you further on these objectives during our fourth quarter and fiscal year-end earnings conference call.
In summary, we're off to a great start for holiday, and our associates are energized by the buzz and excitement generated by the console launches. We have long said that the newness in consoles and software drive our business, and we see that playing out now. While we are now benefiting from a nice tailwind, we are equally focused on transforming our company for the future and believe we have the right initiatives in place to achieve this goal. Reshaping GameStop for effective market reach and offering a broader array of products and services in the games and entertainment space. In the short term, we will remain intently focused on continuing to improve our financial architecture. Today, GameStop is a meaningfully more efficient, streamlined organization than it was 15 months ago.
Due to all the hard work that our teams have done as part of stabilization and optimization components of our strategy. As a result, we believe we are poised to capitalize on significant profit flow-through improvement as we experience sales growth, led by both the Generation 9 console launch and expected new software title slate, as well as the expansion of the transformation phase of our strategy and many exciting category and product extensions and services we will bring into our ecosystem in 2021 and beyond. I will now turn the call over to the operator, and we'll take any questions that you may have.
Thank you. We will now be having our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. For those of you using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we now poll for questions. Our first question comes from Stephanie Wissink with Jefferies. Please proceed with your question.
Hi, this is Ashley Helgans on for Steph Wissink. Thanks for taking our questions. On the SG&A reduction, you've been running about $100 million a quarter. What should we expect for pacing by quarter going forward, and what are the remaining cost buckets to address? Just on your performance in the quarter, how did it benchmark to industry figures of third-party data sources like NPD? Thanks.
Hi, Ashley. Thanks for the questions. With respect to SG&A, look, again, we continue, as you know, for several quarters now, addressing SG&A in virtually every facet of the business. It won't be that different from the contribution of expenses for any quarter, as we've seen historically, because we're really removing cost out of the entirety of the system. A lot of it is stores coming offline. A lot of it is productivity in our labor forces, both in the stores and the DCs, all aspects of our corporate G&A. It really is everywhere. I don't know that that's going to change very much at all based on the history. I'm sorry, the second part of the question was?
Oh, yeah. Thank you. That was helpful. The second part of the question was just on the performance in the quarter, how did you benchmark to industry figures like NPD?
Yeah, I'm not exactly sure how to comment the benchmark point. Look, again, I think the quarter was in line with our expectations. If you just go back a year, when we first got here last summer and we set out on this journey, we said, "Look, these next four quarters will be representative of exactly what we just saw." They met our expectations. More importantly, what happens at the end of a cycle, as we then transition to the next one is, we're not competing on price at the end of a cycle. Again, it's a balance, but importantly, I think the third quarter is behind us now, and I think the most important point here is that we are indexing very well as we launched into the November timeframe and the launch of these consoles.
I think that's the critical message today is that we've made that transition, and we're laser focused on moving forward.
Yeah, I think that's right. I think all I'd add is that we knew that we were going to experience some voids in hardware as we got to the end of the cycle without the prior generations in place in any kind of quantity. We had some software titles move from Q3 to Q4, we are wave-affected during this pandemic. Very clearly, as waves break out across the country, we feel the impact of that as shoppers become less and less comfortable, particularly going to a specialty store for a specialty purchase.
Okay, great. Thank you. If I could just squeeze in one more. E-com representing 18% of the mix in the quarter, how much of the online business is now fulfilled from stores?
Yeah, that's not a stat that we've actually supplied, but suffice it to say, it actually fluctuates, and this is important because it's based on what the consumer is demanding in. If it's a ship from store or a buy online pickup in store or a direct-to-consumer element or an absolute footfall into the box itself from a pure POS traffic standpoint, again, I think it's fluctuating. That's important. That's exactly what we mean by a frictionless, digitally led, omni-channel retailer is letting the consumer pick when they want the product, and we deliver to it.
Okay, great. Thank you so much. I'll pass it off to someone else.
Thanks, Ashley.
Thank you. Our next question comes from Colin Sebastian with Robert W. Baird. Please proceed with your question.
All right. Good afternoon. Thanks, guys. Clearly a lot of progress being made with e-commerce and with expense controls. As it pertains to the transformation plan, I wonder if you could provide some context on how this differs from what was outlined in the letter to the board. At face value, it seems like there's a fair bit of overlap in terms of the shift to digital first and shrinking the store base. That's my first question.
Yeah. Look, I'll only comment on our progress as we see it, GameStop Reboot to date and where we are today. We look at the business, and we feel quite good about the financial stability measures that have taken place. Over the period of GameStop Reboot, we've reduced long-term debt by well over $500 million. We've returned $200 million to the shareholders through buybacks, which represent about 37% of the company. We ended the quarter with $300 million more cash than same quarter last year, and that's been a trend. That's something that's been pretty continuous throughout the GameStop Reboot process. Just prior question, your SG&A run rate of reduction seems to be $100 million a quarter. Yes, it does. That's very much an important part of getting where we needed to be. The progress that we've made on working capital has been tremendous.
Fortunately, that began at the very beginning of Reboot 15 months ago, and what that has done to allow us to navigate through this pandemic, I cannot overstate. On the economic stability or financial stability front, good. We have made nice progress on digital for sure, from an e-commerce standpoint. We were behind. We were clearly behind in terms of digital penetration of sales. We were behind in terms of technology. We still are very candid about having work to do, but we have come a long way very quickly. To be up 257% for Q3, to have penetration at that level and really spiking considerably higher than that during peak periods. To have made investments in our e-commerce capability, both in terms of the platforms and human capital that is driving it.
The capability expansion that we made, lease-to-own options, flexible payment terms, proprietary credit cards, all better alternatives for the customer on how to shop. Just kind of looking ahead, while this generation of console launches is very important to us, and it is, and the demand is unprecedented, and it clearly is, we're working to be defined not purely as a console gaming retailer, but as serving the entire gaming community on all the various verticals. We're glad to see sales up 16.5% despite being closed on Thanksgiving Day and being very comfortable in that decision to close on Thanksgiving Day. We have a wide category expansion that both Jim and I mentioned during the course of our comments that are progressing well, really good progress on the digital first omnichannel store fleet optimization work.
We look back, we feel pretty good about where we are and are poised for the next phase of work.
Yeah. Just to put a fine point on it. Again, the second pillar that we launched in Reboot, last year in the August, September timeframe, was to build a frictionless digital ecosystem. That's exactly what we've done. That is leading with technology, leading with a digital footprint that optimizes our e-commerce evolution through the investments in advancing the technology, as well as how it balances with the right footprint of stores. We launched that when we got here and launched our Reboot program. I think that's the point George made. We did it, and we've been making some real strides against it.
Thanks. That's helpful. In the release, there's some commentary around providing growth in reference to 2021. I just wanted to clarify if that's specifically referencing sales volumes next year or something else.
It's absolutely referencing sales volumes next year.
Okay.
I'd say, two-part response to that. First of all, we have growth initiatives in place. Second of all, the console launch is not a Q4 phenomenon, as you all know. I think there'll be great carry forward demand into the entirety of next year and beyond.
Okay. Then lastly, do you have a target for the cash balance expected at the end of the fiscal year?
Yeah. We haven't put it out there, but I would just say consistent with the trajectory that we've been on.
Okay. All right. Thanks, guys.
Yeah. You bet.
Thank you. Our next question comes from William Reuter with Bank of America. Please proceed with your question.
Hi. I just had two quick ones. The first is, and I don't think the question was asked this way, in terms of the November performance, was it in line with your expectations?
Yeah. It certainly was in line with expectations. We knowingly took a chunk out of that by closing on Thanksgiving. I think it's fair to say that in this environment, the sales compression that you might sometimes see is not prevalent. We knew that that was going to be an investment in our people and into safety, and we don't second guess that for a moment. Yes, if you make that change, it is in line with our expectations.
Okay. In terms of the new shelf, I saw that you mentioned general corporate purposes. Would you consider issuing stock to repay debt under that program?
No, that's absolutely not the intent. The intent here is to simply optimize flexibility and optionality, period. There is a lot of unknowns going on in the marketplace with respect to this pandemic, ongoing flex of cases across the world, the impacts on our own businesses, and we're not immune to that. Right. In that regard, look, we're going to continue to execute our strategies that have bolstered and strengthened our balance sheet. You see all the work that we've done, including if we go back to even the long-term debt levels in early 2019 till today. As of this coming Friday, we'll have reduced our long-term debt by over $530 million. By March of 2021, that'll be over $600 million. In that same timeframe, that same roughly 24-month timeframe, plus or minus, we also returned over $200 million to shareholders.
I think, look, the goal is to continue to focus on running the business and optimizing the way we run the business, but also be very pragmatic and make sure that we have capital flexibility with no intention to do anything other than maintain our flexibility. Hopefully that helps you.
Yeah.
Insofar as the debt is concerned, we don't need it.
Yeah, absolutely.
We don't need it, bottom line.
As I mentioned.
Yeah
We'll have Friday as the first voluntary redemption of $125 million of the remaining March 2021 notes.
Great. I'll pass to others. Thanks so much.
You bet. Thank you.
Thank you.
Thank you. Our next question comes from Joe Feldman with Telsey Advisory Group. Please proceed with your question.
Yeah, thanks. Hi, guys. With regard to the consoles, how did your allocation compare to prior cycles? Presumably you sold every single unit that you got. I assume there's still a very heavy backlog. What are your thoughts on allocation through the rest of the period? We know Sony's come out and said that they plan to produce more. Can you share any thoughts on that?
Yeah. I think the demand has been unbelievable, Joe, as you mentioned. We don't see any end to that in sight. Certainly, these are fabulous pieces of technology. The demand is terrific for it. Any allocation that we get, and I think I've mentioned this on past calls, the answer is we always want more. I will say the competitive set has changed between console launches, really with the evolution of direct-to-consumer from the OEMs themselves. That tells you a bit about what the allocations look like versus last time around. We're playing meaningfully, which was our objective, and we're winning well. I think one area and a point of differentiation for us, and it's been part of our premise all along, is we attach differently.
When you look at accessories, first-party software, we attach differently, and that's been recognized, and we have seen some level of reward for that, and we expect it to be a differentiating point for us going forward in terms of allocation.
Thanks. That's helpful. Just another question. With regard to the cash balance, I know that some of it's restricted, but you have $603 million. Presumably, you generate even more in the fourth quarter. Let's say we're getting through this cycle with the pandemic. I understand the next couple of months are going to be rough, but I guess, how are you thinking about cash allocation or cash usage at this point? I know we've talked to people that are hoping you are going to buy back more stock in the coming year, or return to that. I guess I'm curious how we should think about that going forward.
Yeah. Thanks, Joe. The short answer is, again, nothing's off the table. Our job is to find the optimum balance of capital allocation, which starts with ultimately the investment in the transformation of the business for future growth and profitability. That's the first point, and we'll continue to do that. If it means accelerating those investments to bring that return in in a more rapid fashion, we'll do that. It also is the fine balance of the capitalization of the business and ultimately, what is the right level of debt. We think we're approaching that after we get done paying down the rest of these March 2021s. Outside of that, certainly always the consideration to return capital to shareholders as well, as we've proven. Like I said, last year, in 2019, returned over $200 million to shareholders.
I think every one of those is on the table. We are always looking to find the optimum balance of capital allocation.
Just to add the obvious, the underlying environment matters, certainly. We don't know what a few more months means right now. We're obviously encouraged by a vaccine just like all of you are. We see more impact ahead, and we don't know the exact timelines or protocols for that, nor does anybody at this point. We look at something that we have to be guarded about into the future is there's no particular end date in sight yet. This is something we're going to be dealing with for the indefinite future.
Understood. Thanks, and good luck with this holiday season, guys.
Okay, thanks.
Thank you, Joe.
Thank you. Our next question comes from Seth Sigman with Credit Suisse. Please proceed with your question.
Hey, guys. Thanks for taking the question. I wanted to follow up on the Q4 commentary, and I just want to confirm the language here. In the release, you talk about positive year-over-year sales growth. I just want to confirm, are you guiding to year-over-year profitability growth as well?
Yeah, we're not guiding to anything. The comment was specific to growth and profitability in the fourth quarter. Just to be clear, again, we're not guiding to anything. Again, I think we've been pretty straightforward on that.
[audio distortion]
What would you call saying sales year-over-year is then? You're saying sales year-over-year will grow, and there's a comment about profitability. I'm just trying to confirm, are you saying year-over-year profit growth in addition to year-over-year sales growth?
Yeah. Just notation was for the fourth quarter.
Yes, for the fourth quarter, I'm asking.
Yes, that's correct.
Okay. Year-over-year profit growth. The related question is, given the unfavorable mix of hardware, would you expect gross profit to be up as well? Obviously, you're going to have some mix impact here. Comps are going to be up, but you do have the negative mix. Gross profit up, or is it really coming from the cost savings?
A little bit of both. Gross profit dollars, because look, we're talking about volume rate, so you get a little bit from the overall top line as a flow-through, but then you also take advantage of the flow-through to the bottom line as a result of the expense structure that's a lot more optimized than it was last year.
Okay. Interesting. Okay. Just a follow-up question on the market share question earlier. Your growth rates did seem to trail the industry per NPD. I'm just curious, what would be causing that? Do you feel like e-commerce, even though it's clearly progressing, you feel like that's been one of the reasons for lagging or anything else that you would highlight? Of course, with all the initiatives, I'm curious, what do you think is going to be most incremental to regain share as you look out over the next 12 months or so?
Yeah. Look, I think there are periods during the course of Q3, certainly periods during the pandemic, where we certainly are aware of the fact that we lost some share. We've had closed stores. We've had a competitive situation where some of our competitors were open for business, we weren't. You've got a very guarded shopping environment, obviously, as it applies to the brick-and-mortar aspect of our business, where there's a reluctance, there's a significant decrease in footfalls across retail in general, and we're not immune to that in any way, shape, or manner. I think you've got a prescribed shopping trip to GameStop to get gaming, and you've got a general trip elsewhere for multiple purposes. I think that probably is factored in. On the flip side, again, when there's newness in the marketplace, we excel.
We tend to lead in market share for those software releases, those new game releases. That is our strength. We actually believe that we're going to be in a position to begin to claw back market share going forward as we cycle some of those closure periods, as we're able to get customers back in stores and leverage the full omni-channel suite that we offer now. We've gained, certainly through our increases on e-commerce, but there still is significant impact on the brick-and-mortar aspect of the business right now, and there will be for a while longer.
I'd just add one comment on the market share piece. I mean, if you just look at the cyclicality back in the 2013, 2014 Gen 7 to Gen 8 transition period, you'll saw that at the end of the cycle, we tend to lose a couple points of market share, and at the beginning of the cycle, we gain those points of market share. A huge reason for that, and that is our expectation as we head forward. A big reason for that is, again, the technical consultation of our expert gaming associates that are in the stores. That's important with the advancements of the technology.
Okay, thanks. Thanks and good luck.
Yeah, you bet.
Thank you.
Thank you. Our next question comes from Curtis Nagle with Bank of America. Please proceed with your question.
Good evening. Thanks very much. Yes, I just wanted to continue digging in on the comment about the 16.5% comp in November, and just how to think about how the rest of the quarter plays out. November was obviously the quarter when consoles launched. I think at least it's going to be the only quarter where the industry will see a material sell-through due to the shortages. In November, it likely brought a lot of traffic into stores and the website. Thinking about December and January, where you and your peers aren't likely going to have a ton of supply, at least I think, do you think you see a reversal in traffic? How do we think about comps staying positive? What's the setup for those two months, where again, you just don't have that traffic driver in any materiality?
Yeah, I think, Curt, first of all, let's take any potential effects of unknown components of the pandemic off the table. Look, we've seen it time and time again that it affects retail mobility. Let's just assume no one knows the impact of that. Take it off the table. The very simple fact outside of that is that, again, we're continuing to execute here in the fourth quarter. This is not a couple of weeks in the month of November. To be clear, that's not what this is, and it's certainly not the fourth quarter either. As George said earlier, this is a multi-year evolution here, and this is just the beginning.
Yeah, look, there's going to be impact on December, as you know. You've likely heard about global supply chain issues on every call that you've been on, and it certainly is a fact, and it is a mitigating factor. We have newness in December. We have a release coming up in two days called Cyberpunk 2077, which is a big driver for us. We certainly believe that there are other events that will drive traffic in the month of December that will continue this.
The other thing is, again, I don't want to miss not playing to the fact that we have added so much customer flexibility, both in delivery options and payment options. These are all resonating incredibly well with our consumers and giving us an advantage. Again, this is how you take advantage of a full omni-channel execution. Those are continuing to be part of our business as we move in through December and beyond as well.
Okay. Just as a quick follow-up, any commentary on the used business, how did that trend go into 3Q? I guess, how is the hardware portion of that segment doing? Maybe seeing a little bit of boost nearer term, just given.
Supply constraints across both next-gen and current-gen consoles and how is software performing as well?
Yeah. On the hardware side for the third quarter, as it should be expected, again, you've got lower supply elements. As we go forward, I mean, our ability to intake. When our stores are closed, we're not intaking pre-owned hardware, right? I mean, that's just a natural equation. However, as we're navigating through this launch, a big part of that is our engagement with our customers with pre-owned product. We're positioning quite well. I think what's different, though, as we go forward this time around, is that the OEMs are not making the prior-gen product anymore. That's critical, because if you want a prior-gen product, a lot of people do, there's demand in that marketplace, we are really your shop to go get that.
Yeah. I'd emphasize that last point. We're bullish on pre-owned hardware for just that reason. Just to, again, go back in time a little bit, the intake issue is pretty self-explanatory. We have pre-sales, and then we have launch events for new next-generation consoles. You're not going to get my old console until I get my new console. There's an inherent delay in that happening, and then it does. That's where we are right now is kind of in the fulfillment and high demand phase, working through those pre-orders, but really in a very constricted environment going forward. We actually think that this can be a bit of a renaissance for pre-owned gaming with the absence of the older generation consoles out there, and we have them, and we can remanufacture them.
Okay. Thank you.
You bet.
Thank you. There are no further questions at this time. I'd like to turn the floor back over to George Sherman for any closing remarks.
Yeah, let me have Jim make one quick comment, and then we'll close out the call.
I just wanted to call your attention. This quarter, as we're making this transformation, we added some slides to the IR website. I'll call your attention to those that continues to iterate and lay out for all of you our journey. Please take a reference to those. George?
Yeah. Thanks to everyone. Wishing you a safe and happy holiday. It's obviously been a quite unusual year. Hope you have a great end to it. I want to lay out our communications cadence going forward. We will provide you with holiday sales results in early January, and then more details regarding our strategy and outlook at the ICR conference happening virtually in January, and again, following our fourth quarter and year-end results. Thank you all very much.
Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation, and have a great day.