Blockbuster more than doubles planned store closures to nearly 1,000
Facing increasing pressure from Redbox and Netflix and its own debt problems, Blockbuster is planning to more than double the number of stores it will close by the end of next year, the company revealed in a regulatory filing today.
Struggling Blockbuster was previously looking to shutter 410 to 450 of its most unprofitable stores this year and next. A series of "accelerated closures" will bring that number to between 810 and 960, however.
In addition, Blockbuster is attempting to change or end leases on 275 to 300 stores and convert an additional 250 to 300 to outlets. That means 1,335 to 1,560 of Blockbuster's physical locations will likely be shut down or altered by 2010.
There are currently 4,356 Blockbuster locations around the country, meaning at least 22% could be closed down within 16 months and an additional 14% could close or change from their current state.
Blockbuster reports that 18% of its stores are unprofitable, while 47% more are only mildly profitable, according to the filing. A core 35% of the company's locations provide 80% of its retail profits.
The company estimates that it will save $30 million from avoiding ongoing losses at the stores it will close and that between $20 million and $30 million of existing revenue from those locations will transfer to others. In addition, Blockbuster anticipates it will get a one-time benefit to its working capital of $26 million. Terminating the leases will cost it $60 million, however.
The accelerated store closings are part of a plan by Blockbuster to alter its debt agreements that have so far this year squeezed the company's capital and forced it to hold back on investments in marketing and in-store stock.
The amendment to one of its loans, made on Monday, allows Blockbuster to extend the final repayment date from Aug. 20, 2011 to May 31, 2012, and it also increases the interest rate it must pay. It also allows the accelerated store closures disclosed today.
At the same time, Blockbuster is aiming to expand its rental businesses outside of the physical stores, including its Netflix-like mail rentals, retail kiosks that compete with Redbox and digital downloads. As part of a partnership with NCR Corp., Blockbuster is planning to expand from 497 to 2,500 kiosks by the end of this year and to 10,000 by 2010.
Blockbuster lost $39.7 million and saw its revenue decline by 22% last quarter, while Netflix and Redbox reported that their revenue grew 20% and 110%, respectively.
— Ben Fritz
Photo: A Blockbuster in Dallas. Credit: Ron Heflin / Associated Press.