The company said first-quarter revenues fell to $1.12 billion from $1.39 billion, citing a reduction of inventory, lower advertising spending, weaker DVD titles and lower traffic as many potential customers chose to watch movies in theaters.
People would rather be going to the movies...and this has been pulling traffic from Blockbuster stores, especially on those important weekend nights, Blockbuster chief executive Jim Keyes said on a conference call, noting he expects a stronger DVD slate this summer, but remained cautious.
Net income for the first quarter of 2009 fell to $27.7 million, or 12 cents per diluted share, from $45.4 million, or 20 cents per diluted share year earlier.
Excluding items like severance costs and store closing charges, earnings were 19 cents a share, surpassing average expectations for 14 cents, according to Reuters Estimates.
Shares of Blockbuster, which has sought to reposition itself in an increasingly digital world, fell over 23 percent to 87 cents a share after-hours, after closing at $1.14.
Keyes said Blockbuster continued to move aggressively with its kiosk initiative, hoping to have 3,000 standalone units by year-end.
Blockbuster rival, Netflix Inc
Industry leader Redbox, owned by Coinstar
Keyes said he would consider closing some of Blockbuster's 5,000 U.S. stores if kiosks ultimately proved successful.
It's possible, he said. The kiosks will be satellites and if we can replace two stores in close proximity, with one store and five kiosks, we think that can be favorable, he said. We're in the process of that analysis and it will depend on the success and acceptance of the kiosks and the continued diversification of the stores, he said.
Blockbuster said it remained comfortable with its prior full-year guidance for fiscal 2009, which includes adjusted earnings before interest, taxes, depreciation and amortization in the range of $305 million to $325 million.
The company also announced it had secured funding for a $250 million amended and extended credit facility and said the financing, cost savings and additional cash provided sufficient liquidity going forward.
Keyes said Blockbuster can reduce debt by $400 million in the next two years and also said Blockbuster was exploring asset sales, such as stores in international markets, to raise $100 million.
First quarter 2009 domestic same-store sales fell 10.9 percent, compared to an increase of 2.9 percent in the same period in 2008, which came as a surprise to some analysts.
Blockbuster made the best of the situation through cost controls, but the negative same-store sales was bad, said Michael Pachter, analyst with Wedbush Morgan Securities.
(Editing by Carol Bishopric)