BBI 2009 Q2 Earnings

Following the closing bell on August 13, in-home movie and game entertainment provider, Blockbuster Inc. (BBI) announced that the company’s loss during the 2Q narrowed based on improved margins and lower overall expenses. Despite posting a better showing than in the prior year, the company’s performance came in well below market expectations.

For the recent quarter, Blockbuster recorded a loss of $39.7M, or $0.21 per share, an 11% improvement year-over-year from their loss of $44.7M, or $0.23 per share a year ago. 2Q results were affected by $36.9M, or $0.19 per share charges related to store closings, severance packages and losses on the sale of games to third party wholesalers when stores were dissolved.

Blockbuster has closed 276 thus far this year.

With stiff competition from rivals Netflix Inc. (NFLX) and DVD-rental kiosk operator Redbox (CSTR), Blockbuster saw quarterly revenues decrease from $1.3B to $1.02B, a decline in overall sales of almost 22%. However, the company was greatly impacted by an unfavorable foreign exchange rate that cost the company $61.3M in overall revenues.

On average, analysts within the industry were looking for Blockbuster to post a quarterly loss of $0.12 per share based on overall sales of $1.12B.

"We believe our time and our resources are better deployed building the infrastructure that will allow us to compete more effectively over the long term," commented James Keyes, CEO at Blockbuster.

Looking further into the company’s report, domestic revenues retreated to $712M, while international sales slipped to $307.4M. Surprisingly, the company’s gross margin increased year-over-year, climbing from 50.2% to 55%.

Margins were bolstered by the company reducing overall expenses by more than 17% to $562.5M, and Blockbuster is on pace to cut an additional $200M by the end of the year.

Blockbuster’s domestic same store sales figures slipped nearly 18% from last year’s totals, representing a 13.3% decline in rental revenues and nearly a 38% drop in retail sales from last year.

Through the first six months of the year, Blockbuster has recorded a net loss of $14.8M, or $0.08 per share, versus a net loss of $2.1M, or $0.01 per share from the same period a year ago. Revenues during the two quarters slipped nearly 29%, falling from $3B to $2.14B.

Keyes remarked about the remainder of the year, "Although market dynamics remain challenging, we expect improvements during the second half of the year will be driven by a favorable title slate and increased unit availability."

Having posted a sub-par quarterly performance report, Blockbuster downwardly adjusted their EBITDA earnings expectation for 2009 and is now anticipating earnings to range between $270M and $290M. The company previously expected earnings for the year to come in between $305M and $325M.

Net income for the year is projected to range between a loss of $15M and a profit of $5M.

Following the company’s announcement, shares of BBI plunged nearly 20%, or $0.17 per share in after hours trading. By the conclusion of the August 14 trading session, Blockbuster’s stock retreated 15.1%, losing $0.13 to end the week at $0.73 per share.

Over the course of a year, the company’s stock price has ranged as high as $3.05 per share and as low as $0.13 per share.

By BetterTrades