Blockbuster posts loss, drops forecast.
- From: Allan <Spamstillsucks@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx>
- Date: Tue, 09 Aug 2005 10:47:09 -0400
http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=URI:urn:newsml:reuters.com:20050809:MTFH78757_2005-08-09_13-34-50_N09387142:1
CHICAGO, Aug 9 (Reuters) - Movie rental chain Blockbuster Inc.
(BBI.N: Quote, Profile, Research) on Tuesday posted a quarterly loss
that was more than double Wall Street's forecast as lackluster new
video releases failed to attract consumers.
The largest U.S. home video and DVD rental company also said it was no
longer on track to meet its 2005 financial forecast and said it has
reached an agreement with creditors to waive certain debt covenants
for the second and third quarters. Without the waiver, the company
would have been in default, Blockbuster said.
Also Tuesday, Blockbuster said it was raising the monthly fee for its
online service. The price of a three-movie plan will rise to $17.99
from $14.99 as of Aug. 19, bringing it in line with Netflix Inc.'s
(NFLX.O: Quote, Profile, Research) price.
Blockbuster has been spending heavily to build an online service to
compete with Netflix, while its business has also been hit by
consumers buying videos at retailers like Wal-Mart Stores Inc. (WMT.N:
Quote, Profile, Research) rather than renting.
But the online business is less profitable than store rentals, Stacy
Widlitz, analyst at Fulcrum Global Partners said.
"They are stuck in a Catch-22," Widlitz said of the online business.
Blockbuster can either raise online fees and risk losing subscribers
to Netflix, or "just continue to lose a lot of money at it."
The company has been hurt by a 19-week Hollywood box-office slump
during the spring and summer that is now working its way into the
rental market. The company said industry weakness should continue in
the third quarter before the video release schedule improves in the
fourth quarter.
Blockbuster posted a loss of $57.2 million, or 31 cents a share, for
the second quarter, compared with a profit of $48.6 million, or 27
cents a share, a year earlier.
Excluding severance costs, asset impairment charges and stock-based
compensation, the loss was 22 cents a share. On that basis, analysts
were forecasting a loss of 10 cents a share, according to Reuters
Estimates.
Revenue fell 1.6 percent to $1.40 billion. Sales at stores open at
least a year, a key measure for retailers, fell 4.7 percent.
The declines were largely the result of the company's decision to
eliminate late fees on video rentals, which cut into overall revenue.
The plan appears to be attracting more business, as rental
transactions rose 10.4 percent in the quarter, Blockbuster said.
Still, "the bottom line is you just wiped out 15 percent of your top
line (by eliminating) late fees, so giving us metrics excluding that
is not all that relevant," Widlitz said.
"Arguing with anonymous strangers on the Internet is a sucker's game
because they almost always turn out to be -- or to be indistinguishable from
-- self-righteous sixteen-year-olds possessing infinite amounts of free time."
- Neil Stephenson, _Cryptonomicon_
.
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