Blockbuster's Q4 same-store sales rise 4.4%

Videogames, consumer electronics drive increase

By Danny King -- Video Business, 3/5/2009

MARCH 5 | Blockbuster's fiscal fourth-quarter U.S. same-store sales increased 4.4% from a year earlier, and its profit, excluding certain items, beat its forecast, the largest U.S. movie-rental chain said in a preliminary earnings report today.

Blockbuster, whose stock plunged earlier this week after it was reported that it was considering a possible bankruptcy, will release its full earnings March 19. The company denied that it is considering bankruptcy.

Blockbuster attributed its rise in comparable-store sales for the quarter ended Jan. 4 to a 36.5% surge in same-store retail sales, which more than offset a 2.6% drop in comparable-store rentals. The chain said the retail sales increase was driven by higher sales of videogames, videogame merchandise and consumer electronics.

For the full fiscal 2008 U.S., same-store sales rose 6.4%. Blockbuster's fiscal 2008 profit, excluding some items, beat its forecast of as much as $315 million, though the company today warned of a non-cash goodwill impairment charge it will record for the fourth quarter.

Earlier this week, Blockbuster said it hired law firm Kirkland & Ellis LLP to provide advice on how to address about $370 million in debt that’s scheduled to expire in August. Blockbuster denied a Bloomsberg News report that cited a person familiar with the situation as saying the retailer was exploring a possible bankruptcy. Blockbuster shares fell as much as 86% to 13¢ a share on the news, before rebounding to 22¢ during regular trading and rising to 40¢ after hours. The share price was up 23% to 58¢ a share at about 10 a.m. Eastern time today.

Blockbuster's debt is becoming a concern as the company has been improving its financial performance. In November, the chain, which is shuttering underperforming stores, said it cut its fiscal third-quarter loss in half by increasing its focus on videogames, consumer electronics and rental profitability, while making plans to deepen its commitment to digital delivery.

"In 2008, we executed on our key initiatives to grow the core rental business, enhance our retail offering and develop digital delivery channels," Blockbuster CEO Jim Keyes said in today's statement. "With respect to our financing initiatives, we continue to work diligently to resolve the August 2009 debt maturities, aggressively reduce costs and maximize the company's strong cash flow generation."

As of Oct. 5, Blockbuster had $95 million in cash and $615 million in long-term debt, according to filings with the Securities and Exchange Commission. About $370 million of the debt is due in August, primarily to JPMorgan Chase.