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Blockbuster CFO: Store Closures to Increase Pre-Tax Earnings $60M

3 Dec, 2009 By: Erik Gruenwedel

Blockbuster Inc.’s plan to shutter more than 900 stores through 2010 could generate increased pre-tax earnings from $50 million to $60 million, according to CFO Thomas Casey.

Speaking Dec. 3 at an investor event in New York, Casey said the Dallas-based No. 1 DVD rental service was in the process of liquidating 350 Blockbuster locations through a third-party service.

“We don’t have long-term leases, so the lease termination cost is not that great,” Casey said.

The executive said the rental chain had cut $208 million from sales, general and administrative (SG&A) costs through the first nine months of 2009, with a goal to eliminate $500 million in overall costs through 2010.

While Blockbuster continues to develop a multi-platform distribution strategy that includes streaming and kiosks, Casey said greater emphasis would be put toward expanding the company’s 1.6-million by-mail subscriber base.

He said the $19.99 monthly three movies out with five in-store exchanges continued to be the most popular rental plan.

“We think that is a great value proposition … it’s just that not enough people know about it,” Casey said.

He said the last month of the year typically represents about 30% of Blockbuster’s annual pre-tax earnings. With the recently announced $675 million financial restructuring, Casey said Blockbuster stores would stock significantly larger unit quantities of new releases.

“We’re pleased with how we have been able to navigate through the capital constraints of 2009,” he said. “With capital, we have the ability to be better in stock. December is by far the most important month for Blockbuster.”

Casey also said Blockbuster continued to work on an app that would allow cell phone users the ability to locate a movie rental at the nearest Blockbuster store, kiosk or online.


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