Analyst: Coinstar, Safeway Deal Could Bode Well for Redbox

9 Jun, 2011 By: Chris Tribbey

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On June 9 Redbox parent Coinstar announced it would install roughly 1,400 coin-counting kiosks in Safeway stores in the United States and Canada this year, and that could spell good news for Redbox kiosks as well, according to one analyst.

“While the news of coin-counting kiosks returning to Safeway is very positive, in our opinion, we are increasingly optimistic about the potential for a renewed relationship to lead to other Coinstar concepts installed within their stores,” Eric Wold, director of research for Merriman Capital, wrote in a note to investors.

Currently Safeway uses Blockbuster Express kiosks, but the Coinstar agreement could lead to Redbox supplanting those kiosks, Wold wrote.

“Should Redbox kiosks replace those Blockbuster kiosks, we estimate this could add more than $100 million in annual revenues and $20 million [to] $25 million in [earnings before interest, taxes, depreciation, and amortization] at kiosk maturity,” he wrote.

John Kraft and Douglas Greiner with D.A. Davidson and Co. wrote in a separate note that “this is a significant commitment on behalf of the supermarket industry leader and a nice vote of confidence for Coinstar’s coin business.”

“Coinstar is in an envious position,” they wrote in an investor note. “The company’s DVD business is growing like wildfire and the overall self-service market is expected to grow at a 20% [compound annual growth rate] over the next few years.”

 

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