What happened

Shares of GameStop (NYSE:GME) stock leapt more than 10% in early trading Monday, before retracing to close the day up a still respectable 6.6%. That may seem a strange way for investors reacting at a time when most stories on GameStop's Google news feed continue to harp on the company's plans to close almost 200 stores in the run-up to the Christmas shopping season.  

But that's not the reason GameStop is up.

Man in suit supporting a red arrow tilting up

Image source: Getty Images.

So what

So what is the reason? Turns out that this morning, a shop by the name of Placer.ai, which bills itself as providing "unprecedented visibility into consumer foot traffic," put out a positive note on GameStop.  

As Placer.ai explained, "2019 has been tough for the retailer GameStop, which had weaker than expected Q2 earnings." Nonetheless, "Placer.ai found hope in GameStop's Q3," noting that "looking at average daily visits in July and August compared to the Q3 2018 average shows an increase of 3.8% in 2019" and adding that "Placer.ai believes this data shows that the company still possesses the brand equity necessary to drive a transformation."

Now what

But if it plans to do effect such a transformation, it had better act fast.

Sales last quarter declined a dramatic 14%, and GameStop lost more money than analysts expected. In fact, over the past 12 months, GameStop has now racked up $1.1 billion in losses, and while free cash flow remains positive, that metric, too, looks to be on the cusp of turning negative. Compared with the nearly $500 billion in positive cash profits GameStop was raking in annually as recently as 2015, the past year has seen GameStop collect just $13.5 million.

Time is running out for this once powerful consumer brand.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.