Struggling video-rental chain Blockbuster (BBI) posted another dismal earnings report for the fourth quarter -- a period that is usually its strongest because of the holidays. The company -- long under assault from Netflix (NFLX), rental kiosks and online video offerings -- shut down 253 of its U.S. stores in January. It now plans to shutter another 150 or so in April, and additional closures are planned for a total of between 500 and 545 stores in 2010. The latest moves follow Blockbuster's closure of 374 U.S. stores last year, which left it with 3,525 entering 2010.
The beleaguered chain posted a wider quarterly loss after Wednesday's closing bell, hurt by massive charges related to the diminishing value of its assets. For the most recent quarter, the Dallas-based company reported a net loss of $435 million, or $2.24 a share, versus a loss of $359.8 million, or $1.89, a year ago. Excluding whopping write-downs for asset impairment, Blockbuster recorded an adjusted loss of 35 cents a share, far deeper than analysts' forecast loss of 17 cents, according to Thomson Reuters.
Revenue decreased to $1.08 billion from $1.31 billion in the prior-year period. That top-line number did manage to match Street estimates, but that hardly allayed investor concern, and shares sold off sharply.
"Indeed, the revenue erosion despite bolstered inventories and higher advertising spending affirms our stance that the competitive landscape has changed permanently and Blockbuster is at a severe competitive disadvantage given its eroding brick and mortar business," wrote BMO Capital Markets analyst Jeffrey Logsdon, who rates shares at market perform (hold, essentially).
Competition is hitting Blockbuster on every front: from Netflix, online video offerings from Apple (AAPL) -- among others -- and Coinstar's (CSTR) Redbox kiosk business. Blockbuster's "dying by-mail business, its half-measured entrance into the kiosk business" and too much debt are all working against the once dominant rental chain, Logsdon added in a note to clients.