Blockbuster spent the better part of the year in a round of capital raising and debt refinancing to alleviate a cash-flow crunch and is turning its attention to growth in the fourth quarter, Chairman and Chief Executive Jim Keyes told analysts.
Keyes reiterated that the company would stay focused on its stores and asked analysts for patience while new revenue sources, including rental kiosks, games-by-mail and on-demand rentals, take hold. None were expected to generate material revenue for months, Keyes said.
These things are going to take awhile. These things are basically on trial purposes, Keyes said on a conference call regarding on-demand sales through TiVo. Give us time. Sorry I can't give you much color.
Keyes attributed a 14.4 decline in quarterly same-store sales -- double what many analysts were expecting -- to a smaller inventory of available titles at Blockbuster stores, a weaker slate of movies in the quarter, the global recession and a rise in theater attendance.
Wedbush Morgan analyst Edward Woo said that the company's poor results were due partly to light inventory at its stores but also continued competition from Coinstar's
Blockbuster's shares have lost more than 50 percent of their value since hitting a year-high of $1.70 per share in January 2009.
Netflix is growing really well in a bad economy -- the same economy Blockbuster is facing, Woo said. You have to wonder how much more patience investors will have.
Blockbuster reported a net loss of $116.8 million, or 60 cents per share, compared with a loss of $17.8 million, or 9 cents per share, a year earlier.
Excluding items, Blockbuster lost 25 cents per share, or more than double the 11-cent loss expected, on average, by analysts, according to Thomson Reuters I/B/E/S.
Third-quarter revenue fell about 24 percent to $910.5 million from $1.2 billion a year earlier. That was below analysts' average forecast of revenue of $1.01 billion.
Blockbuster, which has cut its marketing budget to the bone so far in 2009, plans a modest bump in advertising in the fourth quarter targeting in-store and by-mail customers, Keyes said.
Chief Financial Officer Tom Casey expects fourth-quarter cash from operations to be strong, reflecting improved product availability and a stronger slate of movie titles.
Casey forecast fourth-quarter gross margin as a percentage of revenue will be in line with prior-year levels, and that working capital in the quarter to be a significant source of cash.
He also reconfirmed Blockbuster's August forecast for full year earnings before interest, taxes, depreciation and amortization of $270 million to $325 million.
Keyes told Reuters the company was well positioned for an economic rebound or a continuation of doldrums fueled by job losses. If the economy rebounds, we will get the benefit of incremental spending ... if not we believe customers will rediscover the value of rental.
Shares of Blockbuster fell 11 cents to 72 cents after closing at 83 cents on the New York Stock Exchange.
(Editing by Gary Hill, Steve Orlofsky, Phil Berlowitz)