GameStop Corp said its growth this year will be driven by a strong holiday lineup and customers buying used games to save money, which sent its shares higher after an initial drop on Thursday.
The largest video game retailer said its second-quarter profit and revenue fell as sales of video game hardware and software unperformed. Its shares fell by as much as 10 per cent before turning positive in the afternoon.
Sales of traditional video game products such as consoles have been struggling globally as gamers turn to lower-priced online games or play games on tablets and cellphones.
Strong holiday season
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But GameStop expected a strong holiday season, as orders grow at a record pace for upcoming titles such as Activision Blizzard Inc's Call of Duty and Electronic Arts Inc's Modern Warfare 3.
With markets down on Thursday, it took some time for investors to realize GameStop's potential this year.
"The optimism about the second half of the year is now beginning to make it onto the marketplace. That word is starting to get out and you're seeing a recovery taking place," said GameStop president Tony Bartel in an interview.
Manufacturers such as Sony Corp and Nintendo Co Ltd have been cutting prices, which will help GameStop in the lead-up to the holiday season. On Wednesday, Sony said it was cutting the price of the entry-level PlayStation 3 console by nearly a fifth in the United States.
Bartel said GameStop saw a bump in sales last week as soon as it started selling the cheaper PlayStation units.
For the second quarter ended July 30, the company said its net income fell to $30.6 million (Dh112 million), or 22 cents per share, down from $39.8 million, or 26 cents per share a year earlier. Its earnings beat Wall Street by a penny.
"This is not as bad as people were fearing," said Sterne Agee analyst Arvind Bhatia, pointing to the company's 12 per cent boost in used video game sales, which have higher margins than sales of new games.