Replies to post #7833 on Mike Lindell Media Corp (MLMC)

[Bruce A Thompson]

Blockbuster Posts Loss, COO Resigns

10/27/2004 08:39:24


CHICAGO (Reuters) - Blockbuster Inc. <BBI.N> on Wednesday posted a $1.42 billion quarterly loss due to large impairment charges prompted by Viacom Inc.'s <VIAb.N> spin-off of the video chain and also said its chief operating officer was resigning.
Profit also slid sharply excluding the charge, falling well short of analysts estimates, due to higher marketing costs, falling rental demand and escalating competition from the likes of online DVD renter Netflix Inc. <NFLX.O>.

The company also forecast a significant slide in profit in the fourth quarter, with weakness continuing into 2005, and announced the resignation of Nigel Travis, president and chief operating officer. the company gave no reason for the resignation.

Blockbuster shares fell 3.2 percent on INET Wednesday morning from Tuesday's New York Stock Exchange close of $7.09.

The third-quarter loss amounted to $7.82 a share and compared with a profit of $63.7 million, or 35 cents a share, a year earlier. Included in the loss was $1.5 billion in noncash charges as the company was required under accounting rules to adjust the value of intangible assets when Viacom spun off the company.

Excluding charges, profit was $3.4 million, or 2 cents a share, well below the average analyst expectation of 11 cents a share compiled by Reuters Research.

Revenue rose 1.8 percent to $1.41 billion, helped by the weaker dollar, which boosts the dollar value of sales outside the United States. Same-store rental revenues decreased 6.3 percent, the company said, citing weak rental traffic industry-wide and the high television viewership of the Summer Olympics.

Aside from Netflix, Blockbuster may face more competition as Internet retailer Amazon Inc. <AMZN.O> is seen by analysts poised to join the movie rental fray, which now also includes Wal-Mart Stores Inc. <WMT.N> as a competitor.

To counter competition, Blockbuster has launched its own online subscription rental service and also started a letting customers trade in DVDs and games for store credit.

But the company has also had to speed up investment spending in those initiatives, which is also cutting into profits.

For the fourth quarter, Blockbuster expects profit to decline significantly from the prior year on an estimated low-single digit percentage decline in worldwide same-store revenues, a significant year-over-year increase in operating expenses, an anticipated compensation charge ranging from $60 to $80 million associated with an employee stock option exchange offer and higher interest expense.

The company also said it expects the rental industry to continue to decline in 2005, but that it believes the rental industry will stabilize by the end of 2005 as DVD penetration is projected to reach 70 percent of U.S. households.