M+E Daily
What’s Behind Blockbuster’s Revised Earnings Guidance?
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Despite an overall-industry increase in DVD and Blu-ray rentals during 2009, Blockbuster has significantly lowered its earnings forecast for the year.
The preeminent rental chain now anticipates its earnings before interest, taxes, depreciation and amortization for 2009 (ended January 3, 2010) will be in the range of $195 million to $205 million. As recently as November, Blockbuster CEO Jim Keyes had stated expectations for fiscal 2009 EBITDA of between $270 million and $290 million.
The company has yet to release its full earnings report. Keyes doesn’t cite specific factors as impacting earnings, but points to December as an especially disappointing month for the company.
“During the fourth quarter we redirected our efforts to restore top line performance, especially for the month of December as we tried to leverage the holiday season,” Keys says. “We increased inventory levels to support a higher in stock availability and invested in advertising to drive traffic in stores and online.”
Nevertheless, Keyes says the holiday season performance “was well below expectations and anticipated adjusted EBITDA was affected, specifically in the month of December where as much as 30 percent of our full year EBITDA has historically been generated.”
Overall consumer spending on DVD and Blu-ray rentals was up in 2009. Rentrak Corp. has rental spending up 4.2 percent to $6.5 billion for the year.
Of course, movie and TV show rentals are only part of Blockbuster’s business. And the chain continued to be dogged in 2009 by the increasing popularity of Netflix, Redbox, and cable video-on-demand services.
Analysts will learn more about what exactly is behind Blockbuster’s woes in the coming weeks, when the company reports its fourth-quarter and year-end 2009 results.
