Shares of

GameStop

(GME) - Get Report

were falling despite the company reporting a 20% jump in fourth-quarter sales and higher earnings guidance.

Total sales in the fourth quarter were $625.4 million, compared with $520.4 million a year ago, the company said. Same-store sales rose 3.9%. In addition, total video game software sales increased 27% in the quarter.

GameStop said that due to better-than-expected January sales and tight expense controls, it sees fourth-quarter earnings of 67 cents a share, which exceeds its revised guidance

issued on Jan. 7 of 65 cents to 66 cents a share. Analysts are calling for 66 cents a share. The company will release earnings on March 17.

GameStop shares were recently down 48 cents, or 2.6%, at $17.83.

Bill Armstrong, an analyst at C.L. King & Associates, was baffled as to why the stock is falling, saying the company's conference call and guidance were both upbeat. He chalked it up to "the vagaries of the stock market."

Meanwhile, Dennis McAlpine of McAlpine Associates, believes investors are focusing on the expected competition from

Blockbuster's

(BBI) - Get Report

new store-in-store gaming department called GameRush. GameRush, he said, "seems to be doing better than expected ...

investors seem to be giving some credibility to

GameRush having an impact on what might happen next year."

GameStop expects first-quarter comparable-store sales to be unchanged to up 2% from a year ago, while profit is seen at 13 cents to 14 cents a share. Analysts expect 14 cents a share, on average.

For the year ended Jan. 29, 2005, the company expects total revenue to increase 18% to 20%, with comparable-store sales up 4% to 6%. Earnings are seen at $1.20 to $1.24; analysts have forecast $1.23 a share.