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Post-Holiday Sales Jump

28 Mar, 2003 By: Joan Villa

Winter storms and a flurry of big box office titles in January and February kept consumers inside and cash registers ringing during the so-called “fifth quarter” post-holiday season at video stores nationwide.

“There's no question that was a very strong January and February for us, and the titles really worked,” said Mark Tusher, whose Alamo Video store in Simi Valley, Calif., saw sales and rentals climb 17 percent in January and 23 percent in February compared with the same months in 2002.

In fact, many studios expected consumers would purchase DVD players in droves during the holidays, and then return to stores in January and February to rent and buy new movies. As a result, they offered plenty of choices in the fifth quarter.

The Bourne Identity rented off the charts, but little things like About a Boy and The Banger Sisters did phenomenally well,” Tusher said. “My Big Fat Greek Wedding stupefied me -- we brought in 60 DVDs and 24 VHS, and I could not keep them in. I thought it would be like Titanic in that consumers would buy it and not rent it, but that was not the case.”

However, sellthrough retailers seem to have fared well in the fifth quarter as well.

Peggy Munnagle, merchandising director for Best Buy, said, “The chain has seen double-digit growth in January and February compared with the same time frame last year.” Though sales vary week by week, “We have had a very good calendar first quarter,” Munnagle said.

Retailers nationwide appear to have benefited from the stronger slate, according to Video Store Magazine market research. With the box office strength of January releases up 15.2 percent, to $695.6 million, compared with the strength of video releases in January of last year, retailers reaped about a 12 percent boost in rental revenue on those titles, to $621 million, through March 23.

Total consumer spending at the rental counter in January posted a 4.8 percent increase from January 2002. Similarly, total unit sales were up 15 percent from January 2002, according to Nielsen/VideoScan data.

In February, the jump was more pronounced. The month saw both a 22.6 percent increase in rental revenue on new titles with a theatrical release, to $371 million, through March 23, and a box office punch -- thanks to the runaway successes of Greek Wedding and Sweet Home Alabama -- that was 238.4 percent higher, surpassing $800 million.

Total consumer spending at the rental counter jumped a whopping 20.4 percent in February versus the same month the year before. Total unit sales in February jumped 31.1 percent over the comparable period in 2002, according to Nielsen/VideoScan data.

“We saw a jump in January, but we saw a bigger jump in February,” said Todd Zaganiacz, owner of Video Zone and president of the 55-store New England Buying Group. “February was incredibly strong, but I attribute part of that to competing with the Olympics last year. This year [was] very much in our favor, with at least two weekend storms and a very cold month, so having a strong title slate and bad weather really helped.”

But even where weather wasn't a factor, scores of titles and new DVD players converged to create a strong first quarter. At nine-store Video Depot in Palm Desert, Calif., VP Scott Whitmer boosted DVD buying to 75 percent, up from 50 percent in December, to “stay ahead of the curve” on consumer demand.

The Bourne Identity, Signs and Alabama were his strongest rentals, but Whitmer is also educating his customers to think “purchase” by promoting a quick turnaround on previously viewed titles. Some nearby discounters have begun cutting back on independent films and lower box office titles, which also presents a sales opportunity for the chain, Whitmer said.

“What we want people to do is to rent them and then buy them for a great price three weeks to a month later,” he said. “We have to promote that because, for the first time, we're really competing with the Best Buys and the Costcos and other big-box retailers.”

Blockbuster Video, which has not yet released first-quarter results, was optimistic last month that the rental slump experienced after Thanksgiving was a one-time phenomenon unlikely to be repeated. CEO John Antioco predicted the winter slate would appeal more to renters than buyers. Coupled with growing revenue for higher-margin DVD product, the chain anticipated the quarter would bring single-digit same-store increases worldwide.

With a few days still to go in the quarter, other public rental chains also won't report earnings before mid-April. But early indications are they also experienced robust January sales, according to retail analyst Dennis McAlpine of McAlpine Associates. In releasing fourth-quarter results last month, McAlpine said both Movie Gallery and Hollywood Entertainment said December rentals rebounded after the slowdown following Thanksgiving, and January was continuing that trend.

“The logic is, the first quarter is pretty good because people run out of money after Christmas. They stay at home to pay off the bills, plus the bad weather and the new DVD players -- all those things would say the quarter should be better,” McAlpine said.

Alamo's Tusher also sees less-pronounced “peaks and valleys” in the rental business, thanks to an infusion of enthusiasm from new DVD owners who are rediscovering their neighborhood video store. “We're seeing a resurgence of that old ‘we'll rent anything' attitude and more consistency in coming back than I've seen for a long time,” he said.

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