Shares of GameStop (GME) gained 7.82% to $25.99 in midday trading on Wednesday after the video game retailer reported third-quarter earnings that topped analysts' estimates late yesterday.
Investors bid the stock higher even though the Grapevine, TX-based company also said it sees a larger-than-expected decline in comparable-store sales during the holiday quarter.
GameStop projects that comparable-store sales will fall between 7% and 12% during the fourth quarter, while Wall Street is forecasting a drop of 6.7%. Earnings per share are expected to range between $2.23 and $2.38 for the current quarter vs. analysts' estimates of $2.34 per share.
GameStop reaffirmed its full-year earnings per share guidance of $3.65 to $3.80 and comparable-store sales slumping between 6.5% and 9.5%. Analysts surveyed by FactSet are modeling earnings of $3.72 per share and comparable-store sales falling 7.2% in fiscal 2016.
"While the video game business has underperformed recently, we are focused on maintaining our leading market position, especially during the holiday season, as well as driving diversification through the growth of technology brands, digital and collectibles," CEO Paul Raines said in a statement.
The company, which operates almost 6,000 retail stores in the United States and overseas, has struggled as more consumers are downloading games rather than purchasing physical copies.
GameStop expects a challenging year-end for the traditional physical video game industry, Wedbush Securities said in an analyst note. New hardware and software sales are expected to tumble by about 15% to 20% during the fourth quarter.