Blockbuster Inc. may close up to 25% of its stores in the next year to cut costs and free up cash that will be used to build up other business development, including e-commerce.
In a new regulatory filing with the Securities and Exchange Commission, Blockbuster, No. 37 in the Internet Retailer Top 500 Guide, says it could close between 810 and 960 unprofitable stores between now and December 2010. If all 960 underperforming locations are closed, the total number of Blockbuster’s company-operated stores would shrink 25.6% to about 2,790 from 3,750. The move would also free up close to $26 million in capital that would be used to pay creditors and invest more resources in new ventures, including interactive kiosks and digital delivery of movies and other content.
“Blockbuster’s mission is to become the preferred choice for convenient entertainment anytime and anywhere,” the retailer says in the regulatory filing. The regulatory filing also notes that Blockbuster now has 1.6 million subscribers signed up for Total Access, a program that delivers online rentals by mail and provides subscribers with the option of exchanging online rentals for free in-store movie rentals or discounted game rentals up to monthly plan limits.
Blockbuster also plans to deploy up to 2,500 kiosks by December and as many as 10,000 by next June, the regulatory filing says. Initially the kiosks will be used as vending machines to distribute games and DVDs, but plans eventually call for the kiosks to have a digital download capability as well. In a move that will keep pace with Netflix Inc., No. 18, Blockbuster also is working with various consumer electronics manufacturers to install digital delivery technology in a variety of devices, including cell phones, home theater systems and Blu-ray players. Blockbuster currently has deals with Motorola Inc. and Samsung Electronics America Inc.
Sales for Blockbuster declined 21.5% in the second quarter ended July 5 to $1.02 billion from $1.30 billion. Net loss in Q2 was $39.7 million compared with $44.7 million in the prior year.
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