Blockbuster: No concession to the recession
This year won’t be a blockbuster -- but it won’t be a horror story either.
That was the message today from video retailer Blockbuster Inc., which said its U.S. sales in stores open at least a year climbed 5.1% in the third quarter — the third straight advance. The Dallas-based chain, which will report its full quarterly results on Nov. 6, reaffirmed its 2008 forecast for adjusted earnings before interest, taxes, depreciation and amortization -- also known as cash flow -- of about $315 million.
“In the current economic environment to say, ‘We’re not lowering our numbers’ is an achievement,” said Jeffrey Logsdon, analyst at BMO Capital Markets, who rates Blockbuster “market perform.”
Indeed, rival Netflix Inc. on Monday lowered this year’s expected subscriber growth for the second time this month, citing the troubled economy.
Blockbuster, which tried unsuccessfully last spring to acquire beaten-down electronics retailer Circuit City Stores Inc., has seen its shares plunge by two-thirds year-to-date. The stock bounced back a bit today, gaining 13 cents to $1.32 in NYSE trading -- in a firestorm market where the Dow fell 514 points.
Industrywide, the home video rental business is down 3% to 4% this year and sales are off 5%, Logsdon says, as consumers looking to trim their household expenses turn to cheaper DVD kiosk services such as Redbox, the Coinstar Inc.-McDonald’s Corp. joint venture.
Still, said analyst Michael Pachter of Wedbush Morgan Securities, “it’s very easy to substitute rental for movie tickets when times are tough.” Blockbuster thrived during the 1991-92 recession and again in 2001, noted Pachter, who rates the stock a “strong buy.”