The game isn't over for GameStop (NYSE: GME). Shares opened higher this morning, after the video game retailer posted better-than-expected first-quarter results and reiterated its guidance for the entire fiscal year.

Sales climbed 5.1%, to $2.08 billion. This is the first time that GameStop's top line has topped $2 billion outside of the seasonally potent holiday quarter, though it's merely the handiwork of the company's aggressive expansion. Store-level performance remains a problem, as comps fell 1.6%.

Blame hardware sales for the tumble. Sales of new games climbed by a brisk 13%, even though industry tracker NPD Group posted dreary sales figures during GameStop's quarter.

Meanwhile, used games -- the company's high-margin bread and butter -- rose by just 4% (below the overall 5% sales gain). Do gamers once more have the means to buy full-priced games, or have the buyback models kicked around by Amazon.com (Nasdaq: AMZN), Toys "R" Us, and Best Buy (NYSE: BBY) dented the lucrative used-game niche?

GameStop's net earnings during the quarter rose 7%, culminating in a buyback-aided $0.48-a-share showing. Analysts figured that GameStop would earn just $0.47 a share on $2.03 billion in revenue.

Still, the company's outlook remains mixed. GameStop expects to earn $0.25 to $0.27 a share in the current quarter, short of the $0.29 a share that Wall Street was banking on.

For now, at least, the company's sticking to the full-year guidance it initiated two months ago. GameStop expects earnings to increase between 14% and 18%, to $2.58-$2.68 a share, while comps rise 2% at most, or stay flat at the least.

Should we believe the company?
I tend to doubt GameStop's guidance, because it's been all over the map in the past. This company called a bottom in May, August, and November of last year -- yet it continues to post negative comps.

Let's compare GameStop's upbeat guidance a year ago from its first-quarter report with its eventual performance.

Metric

5/20/09 Guidance

Reality

Comps

0% - 2%

(7.9%)

EPS Growth

18% - 22%

(5.3%)

We should be fair, since GameStop languished in a deteriorating environment last year. This time around, the economy's showing more than a few signs of life.

But I'm still skeptical about GameStop's model in the long run. This company could still end up being Blockbuster (NYSE: BBI) or Borders (NYSE: BGP) in a few years, albeit with a mercifully cash-rich balance sheet. Once digital distribution becomes as big a force in video games as it has been for DVDs, CDs, and books, it'll be hard for GameStop to remain relevant.

At least the company's trying. GameStop will test the marketing of digital downloads later this month. Earlier this year, it teamed up with Activision Blizzard (Nasdaq: ATVI) to promote Legends of Zork -- a free-to-play browser-based online game. While both initiatives deserve praise, isn't the company simply training gamers to seek future entertainment elsewhere?

GameStop still has time. If the company can stay relevant in its market and continue to grow its profitability, its dirt cheap valuation could prove irresistible.

However, I'm still haunted by the question of GameStop's future. Surviving the next three years will be the chain's hardest game yet.

Where do you see GameStop in three years? Share your thoughts in the comment box below.

Best Buy is a Motley Fool Inside Value selection. Amazon.com, Activision Blizzard, and Best Buy are Stock Advisor picks. Motley Fool Options has recommended a write covered calls position on GameStop. Try any of our Foolish newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz will admit to still playing video games, though finding time is tricky. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.