Keyes
Blockbuster brings fresh meaning to Mark Twain's quip, "The rumors of my demise have been greatly exaggerated."
The video rental market may have shriveled, and sales slowed, yet the company's quarterly profit more than quadrupled last quarter, as Blockbuster retools under new CEO Jim Keyes. He's slashing costs, tweaking product and aggressively marketing online and digital services.
"The year 2007 was one of transition, reinvention and repositioning," said Keyes during a conference call on Thursday. The former chief exec of 7-Eleven joined the video giant last July, replacing longtime topper John Antioco.
Blockbuster has moved to salvage its rental biz, diversify revenue streams, broaden distribution and stabilize its finances.
It appears to have made strides, earning $38 million in the latest quarter vs. $8.3 million the year before. Excluding one-off costs, like $13 million in severance payments, Blockbuster said it would have earned $55 million for the period.
Revenue rose 3.6% to $1.57 billion.
Blockbuster shares jumped more than 9% early in the day on the strong numbers before retreating as the overall market turned bearish on economic jitters. (The stock closed down about 9% at $2.77 as the S&P 500 hit a 52-week low.)
Although the fourth-quarter uptick arrived too late to pull the full year into the black, Keyes predicted Blockbuster will be profitable to the tune of between $5 million and $25 million in 2008. The Dallas-based company lost $85 million last year on basically flat revenue of $5.5 billion.
Blockbuster's been on a fascinating ride in recent years, with its business and stock price buffeted by shifting viewer habits and the rise of rival Netflix. In its darkest days, its debt ballooned, and there were even whispers on Wall Street that it might have to file for bankruptcy. At one point, financier and activist shareholder Carl Icahn bought a big chunk of the company. Antioco was briefly sidelined, then reinstated, but he ultimately left after scuffling with management over his compensation.
In 2004, Blockbuster launched Total Access, a service that allows customers to rent movies online through the mail like Netflix does. But Blockbuster clients can also return the movies in stores, and Keyes insists that the brick-and-mortar locations give Blockbuster a competitive advantage.
He said the company's been experimenting with the mix of product in its stores, adding movie posters, soundtracks and gaming consoles, along with a deeper inventory of videos.
Blockbuster has inked deals with Facebook and Yahoo. It acquired Movielink, which gives it the digital rights to thousands of films and creates an infrastructure for digital downloads. Earlier this week, it announced a two-year pact with IFC Entertainment that gives it a 60-day exclusive window for IFC films.
Keyes also cited the recent emergence of Blu-ray as a winner in the high-definition DVD format war as "a big upside" for Blockbuster, clearing up confusion in the marketplace and extending the life cycle of the DVD retail biz. He said that working with Blu-ray parent Sony and studio partners, Blockbuster is installing Blu-ray demo kiosks in 2,000 of its stores "to drive home the benefit of high definition."
And it certainly doesn't hurt that Blockbuster's smaller rival, Movie Gallery, is closing more than 900 stores nationwide as it struggles to emerge from bankruptcy.
On the cost side, Keyes said Blockbuster has cut $50 million in expenses since last summer, and identified another $50 million to go, for total annualized savings of $100 million.
He said changes in pricing and terms, plus improved stock availability, have led to the first positive domestic same-store sales comparison in more than five years. Traditional same-store rental revenue was down only 0.9% year on year -- a huge improvement from the previous year.
Blockbuster's total domestic same-store and by-mail revenues rose 6.1%, reflecting an 11.7% increase in same-store sales and 5.3% growth in same-store and by-mail rental revenues.
Worldwide same-store and by-mail revenues increased 7.4% from the year-earlier period.
Blockbuster also said Thursday that it will restate financial results for the past three years. The revision, a matter of several million dollars each year, will result in a slightly lower loss for the first three quarters of 2007; a slightly higher gain from continuing operations in 2006; and a slightly lower loss in 2005.
Contact Jill Goldsmith at
jill.goldsmith@variety.com