GameStop issued preliminary second-quarter earnings, expecting net income to climb even as sales fall. The shares rose 2.2% in premarket trading.
The videogame retailer on Monday said it anticipates net income of $290 million to $310 million for its 13 weeks ended Aug. 1, up from net income of $168.6 million in last year's comparable quarter.
GameStop said its net income forecast includes about $238 million of net gains related to its eBay derivative asset and equity investment, partially offset by a loss of roughly $75 million on digital assets and related receivables.
The company noted it converted its previously disclosed derivative position related to eBay into a direct equity investments during the quarter, resulting in a decrease in cash, cash equivalents and marketable securities.
GameStop Chief Executive Ryan Cohen earlier this year made an unsolicited offer to buy eBay for about $56 billion, saying he saw a path to make the e-commerce company a much bigger competitor to Amazon.com.
eBay later rejected Cohen's proposal as "neither credible nor attractive," though Cohen has maintained publicly that he will keep trying to pursue a deal. GameStop said in a May filing that it now controls the equivalent of 6.55% of eBay's outstanding shares, up from around 5% earlier this year.
GameStop's second-quarter net sales are projected to come in between $780 million and $800 million, down from the $972.2 million it posted last year. The company said the decrease primarily reflects the prior-year launch of Nintendo's Switch 2, planned store closures and the divestiture of its French operations.
Separately, the company said Monday that it has entered into amendments to its previously announced exchange agreements with certain holders of its 0.00% Convertible Senior Notes due in 2030, as well as holders of its 0.00% Convertible Senior Notes due in 2032, under which roughly $1.4 billion of notes will be exchanged and canceled.
As originally structured, the exchange was to be settled entirely in shares of GameStop's Class A common stock, with the number of shares based in part on the volume-weighted average price of the stock over a 35-trading-day reference period that began on Aug. 3.
As amended, the remainder of the reference period is terminated. Consideration attributable to the elapsed portion of the reference period will be settled in shares, while the remaining consideration will be settled in cash, the company said.