9/16/09

Blockbuster will close stores and channel savings elsewhere

Blockbuster may close up to 25% of company-operated stores in the next year to cut costs and free up cash that will be used to fund new business development, including e-commerce.

Katie Evans , Managing Editor, International Research

Blockbuster may close up to 25% of company-operated stores in the next year to cut costs and free up cash that will be used to fund new 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 will move to close between 810 and 960 unprofitable stores this year and next year. If all 960 underperforming company-owned stores are closed, the total number of physical locations 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 back creditors and invest more 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 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 interactive kiosks by December and as many as 10,000 by next June. Initially the kiosks will be used as a vending machine to distribute games and DVDs, but plans eventually call for the kiosks to have a digital download capability as well.

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.

Topics:

Blockbuster, business, Commerce, marketing, Technology Internet

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