Redbox Q1 revenue doubles on expansion
PHYSICAL: Same-store sales jump more than 30%, parent says
By Danny King -- Video Business, 5/7/2009
MAY 7 | PHYSICAL: Redbox's first-quarter sales more then doubled as the largest U.S. movie-rental kiosk operator broadened its inventory of machines while boosting the amount of sales its gets from each kiosk, parent company Coinstar said today.
Coinstar's first-quarter sales from Redbox and the far-smaller DVDXpress brands jumped 156% to $154.7 million from $60.5 million a year earlier, the company said in a statement. Earnings, excluding some costs, for Coinstar's DVD operations more than doubled to $29.1 million, as Redbox's same-store sales lifted 35% from a year earlier, while the company added 1,700 machines during the quarter to bring the total to 15,400.
Redbox has led growth in the U.S. kiosk industry, which is expected to expand over the next few years as video store chains such as Blockbuster and Movie Gallery close underperforming stores. U.S. rental revenue from kiosks is expected to more than double between 2008 and 2011 to $1 billion, while traditional in-store sales are expected to fall during the same period, Adams Media Research said in March.
"We're self-service with low overhead, and in this economy, that's the name of the game," Coinstar CEO Paul Davis said on a conference call with analysts today.
Redbox boosted its machine count to 12,900 from 6,550 last year through agreements with chains including Wal-Mart and Walgreens. The company said today that it is on track with its previous forecast to have between 20,000 and 22,000 machines installed by the end of the year.
Last month, ATM-manufacturing giant NCR agreed to acquire the majority stake in TNR Holdings, the No. 2 movie-rental kiosk operator, in an agreement that will speed up the kiosk-making partnership NCR began with Blockbuster last year. The deal with help accelerate the process of developing as many as 10,000 Blockbuster Express machines by next year.
Although NCR didn't disclose how many TNR kiosks it was getting, TNR said last year that it had about 2,200 machines in North America. Last September, NCR said it would make another 1,400 for the brand by next year. No. 3 U.S. kiosk operator DVDPlay had about 1,400 machines at the end of last year.
Still, Redbox might gain market share within the kiosk market, as Davis said today that the company recently reached an agreement to replace 2,800 machines of what it called its "second-largest competitor" at three retailers, including H-E-B, Supervalu's Albertson's chain and a third retailer it wouldn't disclose, leaving that competitor with about 500 retail locations.
The company also said it recently made agreements to add 1,000 kiosks in Circle K and Pantry stores. Last month, Coinstar said Redbox executives Gregg Kaplan and John Harvey would be promoted to chief operating officer and chief financial officer, respectively, at the parent company less than two months after the coin-exchange machine maker agreed to buy the 49% of Redbox that it didn't already own for about $175 million in cash and stock.
Overall, Coinstar's first-quarter net income fell 27% to $1.96 million, or 7¢ a share, from $2.7 million, or 10¢, a year earlier, as operating costs rose faster than revenue. Sales jumped 42% to $271.2 million.
