Blockbuster suffers $44.7 million loss
Blockbuster Inc. suffered another loss in the second quarter, but the struggling movie rental chain showed signs of progress by wringing more revenue from its stores while lowering its costs.
Heartened by its rising sales, Blockbuster (BBI, Fortune 500) modestly raised its outlook and predicted it would produce a profit ranging from $21 million to $36 million for the entire year.
"To paraphrase Mark Twain, the demise of Blockbuster has been greatly exaggerated," Chief Executive James Keyes told analysts during a Thursday conference call.
But investors weren’t impressed. Blockbuster shares shed 30 cents, or more than 9%, to $2.89 in afternoon trading.
The Dallas-based company said Thursday that it lost $44.7 million, or 23 cents per share, in three months ended July 6, worse than its setback of $34.2 million, or 18 cents per share, a year ago.
On an operating basis, this year’s showing was actually better than last year, when Blockbuster lowered its reported loss by recording an $81 million windfall from the sale of more than 200 Gamestation stores in the United Kingdom.
After stripping out costs for store closures, employee layoffs and an aborted takeover bid for Circuit City Stores Inc. (CC, Fortune 500), Blockbuster said its second-quarter loss totaled 20 cents per share. That figure was a penny worse the average estimate among analysts surveyed by Thomson Financial.
DVD rentals and consumer electronics have become part of Keyes’ effort to lessen Blockbuster’s dependence on movie rentals.
That strategy also appears to be clicking, with Blockbuster’s merchandise sales climbing 14% in the quarter to $324 million.
While sprucing up its stores, Blockbuster has been spending less on advertising in an austerity drive that curtailed the growth of its online rental service, which ended the quarter with 3.2 million subscribers no fax payday advances. That leaves Blockbuster far behind Netflix (NFLX), which boasts 8.4 million subscribers.
In the second quarter, Blockbuster spent $31.9 million on advertising, a 42% drop. Keyes doesn’t anticipate spending a lot more to promote Blockbuster’s online rental service because it isn’t as financially important to the company as its stores.
The restrained strategy helped lift Netflix’s shares by 51 cents, nearly 2%, to $30.51 in Thursday’s afternoon trading.
Blockbuster is still trying to make its online service more attractive by melding it with Movielink, a service that sells and rents movies over high-speed Internet connections. Blockbuster bought Movielink for $7.7 million last year, but hadn’t combined that with its online rental service until now.
Filed under: economics by Forest