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Blockbuster Seeking to Outsource Main Distribution Center

16 Mar, 2010 By: Erik Gruenwedel

Blockbuster said it would seek to outsource operations at its largest distribution center in McKinney, Texas, which employs 910 people and primarily caters to stocking company-owned stores, according to a 10K regulatory filing released March 16.

“We are currently evaluating various alternatives to optimize our distribution network,” said the Dallas-based rental giant, in the filing.

In an ongoing effort to curtail reliance on lower-margin video stores, Blockbuster continues to roll out Express-branded kiosks with partner NCR Corp., in addition to Blockbuster Online by-mail and Blockbuster On Demand movie downloads and streaming.

Blockbuster ended 2009 with more than 2,200 kiosks in operation — a tally since upgraded to more than 4,000, according to NCR.

Under its license agreement with NCR, Blockbuster provides the vending manufacturer catalog titles older than 26 weeks on consignment basis, keeping 50% of all rental revenue. NCR is responsible for acquiring new-release titles, for which Blockbuster receives from 1% to 10% of the revenue, depending on the title.

As outlined in previous quarterly reports, Blockbuster saw a $277 million decline in domestic same-store rental revenue in fiscal 2009, ended Jan. 3. By-mail disc rental revenue fell $155 million, due in large part to 31.5% drop in subscribers from 2.1 million to 1.4 million.

Blockbuster reported a $42 million, or 19.7%, decrease in same-store movie sales, due to reduced store traffic and a product mix shift, including selling more catalog titles than new releases. Sales of used movies declined $24.4 million.

Blockbuster operated 3,525 company-owned stores in the U.S. in 2009, excluding 493 franchise locations. It operated 1.695 stores throughout 7 countries, including 636 locations in Great Britain, 459 stores in Canada and 321 stores in Mexico.

Blockbuster operates 807 franchises stores in 12 countries, including 305 locations in Australia and 175 stores in Brazil.

The chain is reportedly is looking to sell its European operations, which also include 70 stores in Denmark and 149 locations in Italy.

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