November 21, 2017 / 9:21 PM / a year ago

GameStop posts surprise rise in comparable sales, raises forecast

(Reuters) - GameStop Corp (GME.N), the world’s largest video game and gaming console retailer, reported a surprise rise in quarterly comparable store sales and raised its full-year forecast for the sales amid a continued rise in demand for the Nintendo Switch console.

The GameStop store sign is seen at its shop in Westminster, Colorado January 14, 2014. REUTERS/Rick Wilking

The company’s shares were up 7 percent at $17.90 in after-hours trading.

The forecast was a “solid surprise,” Wedbush Securities analyst Michael Pachter said.

The company said it now expects full-year comparable store sales to increase in low- to mid-single digits, compared with its previous forecast range of the high-end of down 5 percent to flat.

GameStop also reaffirmed its full-year profit forecast of $3.10 to $3.40 per share.

“As we enter the fourth quarter, we are encouraged by the initial customer response to Microsoft’s Xbox One X, and believe that the holiday season results will be driven by new console hardware and collectibles,” interim Chief Executive Dan DeMatteo said on Tuesday.

GameStop said it expected to see continued strength in demand for the Nintendo Switch through the holiday sale season.

Video game publishers including Electronic Arts (EA.O), Activision Blizzard Inc (ATVI.O) and Take-Two Interactive Software Inc (TTWO.O) have lined up a series of game releases, which are expected to boost GameStop’s earnings.

The company’s comparable store sales rose 1.9 percent in the third quarter, compared with a 1.15 percent fall expected by analysts on average, according to Thomson Reuters I/B/E/S.

The company’s net sales rose 1.5 percent to $1.99 billion, beating the average analyst estimate of $1.97 billion.

Sales in the company’s hardware business jumped 8.8 percent, while sales in its video game retail business rose 5.4 percent.

Collectible business, another bright spot for GameStop, soared 26.5 percent. The business includes figurines and cosplay accessories, mostly popular for its Pokémon-related products.

However, sales in GameStop’s technology brands business, which includes authorized retail stores of AT&T Inc (T.N) and Apple Inc (AAPL.O), dropped 11.4 percent due to the late launch of the iPhone X.

The company has been focusing on beefing up the business, as its core physical video games business comes under pressure due to gamers rapidly shifting to downloading games rather than buying physical gaming discs from retail stores.

GameStop’s net income rose 16.9 percent to $59.4 million, or 59 cents per share in the quarter ended Oct. 28.

Reporting by Laharee Chatterjee and Arunima Banerjee in Bengaluru; Editing by Maju Samuel

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