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Blockbuster CFO: Foreign Consolidation Increasing

6 Dec, 2006 By: Erik Gruenwedel

Blockbuster Inc. CFO Larry Zine Dec. 6 said the No. 1 rental company would likely increase consolidation efforts abroad after largely focusing on the U.S. market since 2005.

Speaking at a Wedbush Morgan Securities investor conference in Santa Monica, Calif., Zine said Blockbuster would continue to rationalize U.S. store locations “where it makes sense and continue to buy out of leases when it makes sense to do so.”

He said the Dallas-based company would in some areas shut down a 5,500-square foot location and open a 4,500 square foot location nearby.

Zine said the pace of store closures would be significantly different than in the past couple of years because most of the deep cuts have already been done in the United States.

He said Blockbuster sees a 25% revenue transfer to surrounding domestic Blockbuster locations following the closure of a store. He said he is surprised there haven't been more store closures within the rental industry.

“The in-store rental industry as we know it has been declining, and we see it continuing to decline,” said Zine, who added that industry-wide store closures have dropped this year to 5% to 6% from 11% in 2005.

He sees the increase in online movie rentals offsetting declining store rentals. He said Blockbuster intends to grow its online presence to “take advantage” of consolidation of the in-store market.

The CFO said store closures abroad have not been as aggressive as in the U.S. because “we wanted to fix the U.S. first.” He said Blockbuster is not seeking to sell international assets simply for a quick sale.

Instead, the company is exploring ways to downsize management teams and inventory costs before either selling or shutting down select store operations.

“This is not a fire sale opportunity for people to come in and snatch stores from us,” Zine said.

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