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Analyst Expects Blockbuster to Cut Store Losses 50%

9 Nov, 2009 By: Erik Gruenwedel

Blockbuster Inc. is expected to limit third-quarter (ended Sept. 30) overall store losses to 7.5%, compared to same-store losses of 14.7% during the prior-year comparable period, according to Wedbush Morgan Securities analyst Michael Pachter.

Pachter said the Dallas-based No. 1 DVD rental service will report quarterly revenue near original estimates of $1.01 billion as the chain accelerates closures of underperforming stores — now expected to reach 950 stores by 2010.

“We think that Blockbuster’s declining store traffic may have bottomed, and we expect some further improvement in the September and December quarter as the DVD release schedule improves,” Pachter said in a note.

The analyst said Blockbuster’s recent finalization of $635 million in bonds (due 2014) increased the company’s interest expense while also providing added liquidity and stability.

“Reducing the number of stores and maintaining customer loyalty [through stability] can drive profitability higher,” Pachter said.

Blockbuster reports quarterly results Nov. 12.

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