Blockbuster Meets Same-Store Sales Projections
Despite decreases in areas such as revenues and gross profit, Blockbuster, Inc. met earlier projections of
same-store sales increases for Q4 and fiscal year 2008. Highlights from the media entertainment retailer’s quarterly and yearly
financial results follow.
Q4 2008
Blockbuster reported total revenues of $1.38 billion, a decline of 12% from total revenues of $1.57 billion in Q4 2007. Blockbuster cited the extra week in fiscal 2007, as well as foreign currency exchange rates, worldwide closures of 750 company-owned stores, and lower by-mail rental revenues as impacting revenues for Q4 2008.
Gross profit was $682.3 million, a 14.4% drop from $797.1 million in Q4 2007. Blockbuster cited the same reasons for this decline as it did for the decline in total revenues, as well as investments to support an in-stock initiative for rental products.
Operating expenses were $1.02 billion, a 29% jump from $723.9 million in Q4 2007. Blockbuster said the increase was driven by a non-cash charge of $435 million for the impairment of goodwill and other long-lived assets.
Net loss was $359.8 million, compared with net income of $41 million in Q4 2007.
Domestic same store sales increased 4.4%, compared with a decline of 0.9% in 2007. This figure meets estimates released earlier this month and consists of a 2.6% decrease in domestic same-store rental comparables and a 36.5% increase in domestic same-store retail comparables, largely driven by increased sales of games, game merchandise and consumer electronics.
Fiscal 2008
Blockbuster reported total revenues of $5.29 billion, a 4.5% drop from $5.54 billion in fiscal 2007. Operating loss for fiscal 2008 totaled $293.3 million, compared to operating income of $39.1 million for the full year 2007.
Gross profit was $2.72 billion, a 4.8% decline from $2.86 billion the previous year. Operating expenses were $3.02 billion, a 6.7% jump from $2.83 billion in 2007. The 2008 operating expense total includes the previously mentioned $435 million non-cash charge, as well as a one-time gain of $81.5 million on the sale of Blockbuster’s Gamestation subsidiary.
Net loss for 2008 was $374.1 million, or 406% increase from net loss of $73.8 million the prior year.
Domestic same-store sales increased 6.4%, compared with a decrease of 6.9 percent in 2007. This figure also meets projections Blockbuster made earlier in March and includes a 1.2 percent increase in domestic same-store rental comparables and a 36.5 percent increase in domestic same-store retail comparables, which was largely driven by increased sales of games, game merchandise and consumer electronics.
EBITDA for 2008 was $319.1 million, a 77.3% increase from $180 million in 2007 and beyond the range of $300 to $315 million projected earlier this month.
2009 Outlook
By taking a conservative approach to its business, Blockbuster expects to deliver an EBITDA in the range of $305 to $325 million in fiscal 2009, with net income in the range of $40 to $60 million and operating income in the range of $164 to $184 million.
Bankruptcy Rumors
Earlier this month, rumors circulated in the business press that Blockbuster might soon be facing bankruptcy. The retailer announced it had retained law firm
Kirkland & Ellis LLP for assistance with its ongoing finance and capital-raising initiative on March 3, although a Blockbuster spokesperson denied intentions to file for bankruptcy. A research note from financial analyst firm
Gimme Credit LLC said it would difficult to predict a possible turnaround for the slumping in-store rental business” and that Blockbuster’s fiscal fourth quarter was much worse than expected, although the retailer had recently done a “decent job of containing costs and bolstering liquidity.”
At the end of fiscal 2008, Blockbuster was operating 7,405 stores worldwide, with 3,878 company-owned and 1,599 franchised stores domestically and 1,928 company-owned stores internationally. Domestically, Blockbuster opened 42 company-owned stores and 81 franchised stores during 2008, and closed 169 company-owned and 239 franchised stores. Internationally, the retailer opened 21 stores and closed 161 stores.
