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Q3 Profits Up Substantially At Hollywood Video

23 Oct, 2002 By: Joan Villa

Hollywood Video more than doubled third-quarter profit to $31.9 million from $15.3 million in the year-ago period based on the strength of DVD and games, executives reported today.

Same-store sales climbed 7 percent and consolidated revenue also rose 7 percent to $369 million from the third quarter 2001.

“Today we are no longer in turnaround mode, we are in leveraging mode,” reported president and CEO Mark Wattles.

Since the beginning of the year, the Portland, Ore.-based retailer has spent $50 million boosting DVD and game inventory, catering to the “heavy user” of DVD in breadth and depth, Wattles said. The chain has DVD revenue-sharing agreements with two studios, Columbia TriStar Home Entertainment and MGM Home Entertainment, that account for about 30 percent of DVD rental revenues, he said.

Wattles vowed to keep Hollywood's focus on the three product categories where the 1,804-store chain has a competitive edge: rentals, sales of used movies and games and the growth of game sections catering to buying, selling and trading new and used games.

In the 169 Game Crazy departments developed so far, Hollywood has dedicated 900 square feet out of approximately 6,800 square feet in an overall remodel costing $150,000 per store, he said.

“The net result is a remerchandised store that feels like new and increases revenues by about 50 percent in the first year and increases profit by about 33 percent,” he said.

Expecting same-store sales to grow 10 percent in the fourth quarter, the chain upped guidance for adjusted diluted earnings per share to a range of 36 cents to 38 cents from the previous quarterly guidance of 35 cents to 36 cents. For the full year 2002, Hollywood expects to report $1.19 to $1.21 per share, up from previous per-share expectations of $1.14 to $1.16.

In 2003, Hollywood plans to open 200 new stores, close 20 and add another 300 Game Crazy departments.

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