Blockbuster posts Q1 loss, sees 'challenging' year

Fri, 05/14/2010 - 8:00am
The Associated Press

SAN FRANCISCO (AP) – Blockbuster Inc. posted a first-quarter loss as the movie-rental chain suffered a drop in revenue caused in part by its bruising competition with Netflix Inc.

Blockbuster's CEO, Jim Keyes, said Blockbuster has had "encouraging" talks with investors and potential "strategic partners" that might help the company avoid having to file for Chapter 11 bankruptcy court protection, a possibility that has loomed over the company as its business has faltered.

Blockbuster said after the market closed that its net loss was $65.4 million, or 33 cents per share, for the three months ended April 4. That compares with a net profit of $27.7 million, or $0.12 per share, in the year-ago period.

Excluding severance payments, costs for closing stores and other one-time expenses, the company would have lost 14 cents per share, which matched analysts' forecasts on that basis.

Analysts polled by Thomson Reuters expected $933 million in revenue. Blockbuster posted revenue of $939.4 million, topping Wall Street's forecasts but still representing a 13.5 percent decline from the year-ago period, when it brought in $1.09 billion in revenue.

In the first quarter, sales at stores open at least a year in the U.S. fell 7.8 percent, while international sales in that category fell 5.8 percent.

Keyes said in an interview that Blockbuster is already benefiting from what he describes as a key advantage it has over its rivals and an important part of Blockbuster's long-term strategy: the fact that it can rent out some new releases a month before some rivals because of deals it's inked with studios.

"We think it's a fundamental point of differentiation," he said.

Some analysts, however, have expressed concerns about whether that advantage will be meaningful enough to help lift Blockbuster's fortunes.

The company's chief financial officer, Tom Casey, said he expects that the next 12 to 18 months will be "challenging" for the company. But he added that the announcement this month that Movie Gallery Inc., the owner of Hollywood Video and the No. 2 movie rental chain behind Blockbuster, is planning to close its remaining stores could funnel sales to hundreds of Blockbuster stores.

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