Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal.

GameStop may have won itself some extra playing time. Wait, what?

I know what you're thinking: Are we talking about the same video-game retailer that's long held the distinction of being the most heavily-shorted stock in the S&P 500? The one whose management has promised so many times to transform the company from a brick-and-mortar operation into a one-stop tech shop that the argument seems played-out? The same chain that's projecting first-quarter same-store sales declines of as much as 9 percent?  

Yes, that GameStop  -- but hear me out because mixed in with the downbeat forecast, there are some glimmers of hope.

It's true that GameStop is expecting same-store sales in the current fiscal year to be flat at best to down 3 percent (overall sales may be flat to just 3 percent higher). But those numbers are actually pretty good among the beleaguered retail industry. More importantly, during an investor presentation Thursday, GameStop said it's finally showing some progress in diversifying away from video games. It expects to get 30 percent of its operating earnings from businesses beyond physical games this year, up from 10 percent in 2010. By 2019, it aims to push that number up to half. 

Split Time
GameStop aims to generate half of its operating earnings from sources beyond physical games by 2019
Source: GameStop

The company has been betting big on selling and fixing gadgets through its 76 Simply Mac and 900 Spring Mobile specialty tech stores, which sell AT&T, Apple and other products, and are expected to bring in $1.6 billion of sales and $200 million of operating earnings by 2019. Its digital business now rakes in $1 billion in annual sales and it plans to reach those same figures with its new collectibles business, which sells Star Wars, Batman and other merchandise. GameStop is also reaping rewards from a growing loyalty program of 46 million members, who represent 71 percent of sales, spend three times as much as the average non-member and are five times as profitable.

Extra Lives
Game Stop's share gains this year are about double those of Best Buy
Source: Bloomberg

Investors are taking notice. Shares in GameStop have increased almost 13 percent so far this year, compared to about 6 percent for Best Buy and 2 percent for the S&P 500. And the company's shares are relatively cheap, trading at roughly 8 times forward earnings, compared to Best Buy's multiple of about 11. 

What's more, even though GameStop remains the most-shorted stock in the S&P 500, there are fewer investors betting against the retailer. The percentage of shares outstanding available to trade that are held short fell to about 30 percent this week from more than 50 percent in December, according to data from Markit and Bloomberg.

Short Fall
Short interest in GameStop has fallen to 30% from more than 50% last December
Source: Markit, Bloomberg

GameStop continues to operate in an increasingly competitive retail world, with Amazon and other online retailers continuing to drive down electronics prices and offering alternatives to shoppers. And even though GameStop is punching above its weight in video games, the category has been flat for years as more gamers shift online and away from physical software, hardware and accessories. 

But it has plenty of room to run. GameStop's legacy games business, which generated more than $7 billion of the company's $9.4 billion in sales last year, still provides a lot of cash the company can use to invest in new, growing ventures. It's also been pretty comfortable borrowing money to make small acquisitions and buy back its stock, rewarding shareholders who are willing to stick with the transitioning company. And although GameStops's adjusted debt could increase to 3.2 times earnings before interest, taxes, debt and restructuring or rent costs in fiscal 2016 (from 2.9 times in 2015) its liquidity remains pretty solid and its credit profile is pretty much consistent with Best Buy and Staples, according to Bloomberg Intelligence analyst Noel Hebert. 

In other words, it's far from game over. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in New York at

To contact the editor responsible for this story:
Beth Williams at