GameStop Corp. said its earnings rose 2.8% as the videogame retailer's efforts to expand its product lines helped buoy sales but raised costs for the quarter ended in August.

Shares rose 1.7% to $47 in recent after-hours trading as the results beat expectations and GameStop projected per-share earnings for the current quarter mostly above analysts' estimates.

For the current quarter, GameStop projected per-share earnings of 53 cents to 60 cents, while analysts polled by Thomson Reuters expected per-share profit of 59 cents.

For the period ended Aug. 1, sales at established stores—which includes sales at retail stores open for at least 12 months and online sales—rose 8.1%. The company's technology segment, which includes its business selling smartphones, tablets and other devices, isn't included in the figure.

The growing installed base of Microsoft's Xbox One and Sony's PlayStation 4 consoles has boosted sales of new games as well as used games. GameStop also has been diversifying its business, including its technology brands segment, which sells mobile phones and electronics in partnership with Apple Inc. and AT&T Inc.

Chief Executive Paul Raines said in an interview on Thursday most of the growth in the latest quarter resulted from the company's new initiatives, driven by expansion into digital, mobile and collectibles.

GameStop also has been rolling out its licensed merchandise and collectibles—or "loot"-- business in the U.S. In the latest period, sales of collectible products drove a 38% increase in the company's "other" category.

Technology Brands revenue surged 62% as the company continued to add new stores. In the latest quarter, 182 new stores were opened or acquired.

GameStop had expected to open about 200 stores this summer, including a combination of former RadioShack conversions, GameStop store conversions and new stores.

New software sales fell 6%, but excluding currency impacts sales edged up 0.7%. GameStop's sales of preowned videogames, consoles and related equipment, which has been a profit driver for the retailer in recent years, edged up 0.5%, and rose 5.1% excluding currency impacts.

For the period ended Aug. 1, GameStop reported a profit of $25.3 million, or 24 cents a share, up from $24.6 million, or 22 cents a share, a year earlier. The latest period included seven cents in charges related to its recent acquisition of Geeknet and the technology brands segment expansion. Excluding such one-time items, per-share earnings rose to 31 cents from 22 cents. Revenue increased 1.8% to $1.76 billion.

GameStop had expected per-share profit of 21 cents to 25 cents with sales ranging from a 3% contraction to remaining flat.

Gross margin rose 1.1 percentage points to 32.9%, which Mr. Raines said was driven by expansion into digital, mobile and collectibles, which have higher margins.

For the year, the company raised its per-share earnings estimate to $3.66 to $3.86, from its previous estimate for per-share profit of $3.63 to $3.83, to reflect a reduction in its shares outstanding.

Write to Tess Stynes at tess.stynes@wsj.com

 

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(END) Dow Jones Newswires

August 27, 2015 17:45 ET (21:45 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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