By : Erik Gruenwedel | Posted: 16 Nov 2009
egruenwedel@questex.com

Blockbuster is expected to close anywhere from 525 to 600 additional stores over the next few years on top of the previously announced 950 store closings through 2010, according to Wedbush Morgan Securities analyst Michael Pachter.

Pachter said the increased store closures are needed to combat slowing in-store consumer traffic and heightened competition from rental kiosks and digital distribution.

The Dallas-based brick-and-mortar rental chain’s below-par financial results last week underscored what some analysts believe is Blockbuster’s escalated eroding market share and inherent weakness to kiosks.

Blockbuster posted quarterly revenue and same-store sales of 10% and 92%, respectively, below already-downgraded Wall Street projections.

Pachter said that despite receiving $635 million in bonds, the upside potential for Blockbuster’s stock continued to be limited.

“As pressure from Coinstar’s Redbox DVD rental kiosks and from Netflix intensifies, Blockbuster’s profitability is eroding,” Pachter said in a note.

Eric Wold, analyst with Merriman Curhan Ford in New York, said announced delays by Blockbuster management and NCR Corp. — the Duluth, Ga.-based manufacturer and financial backer of Blockbuster Express kiosks — regarding the proposed rollout of 10,000 kiosks through the end of 2010 highlighted the challenges in the competitive kiosk market.

“In our opinion, that sounds like difficulty securing retail locations for the Blockbuster kiosks vs. the competitive force of Redbox,” Wold wrote in a note.

Wold, who covers Coinstar shares, said Blockbuster’s reduced revenue was the direct result of increased competition from Redbox, Netflix (which he also covers), streaming, downloads and other home entertainment options.

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