NEW YORK — Viacom Inc. named Taco Bell CEO John Antioco as chief exec officer of its troubled Blockbuster video unit Tuesday, filling the gap left by Bill Fields, who quit the video chain in late April.
Antioco, 47, joins Blockbuster after apparently having missed out on the job of running PepsiCo’s restaurant division — which includes KFC, Taco Bell and Pizza Hut, and will be spun off as a separate company later this year.
Still, analysts said Antioco appears to have the right stuff to lead Blockbuster, whose troubles have lately overshadowed Viacom’s entertainment businesses and sent its stock price to levels not seen since mid-1994.
While Antioco comes from Taco Bell, most of his 27-year retailing career has been spent with convenience store chains — first at 7-Eleven parent Southland Corp. and subsequently at Circle K.
With thousands of small outlets, those chains have some similarities to the 5,000-store Blockbuster chain. “With his top-to-bottom understanding of large multi-store retail chains, extensive experience in marketing and brand building … John has the operational and financial expertise to help us lead Blockbuster forward,” Viacom chairman Sumner Redstone said.
“I see a tremendous opportunity to build on Blockbuster’s past successes and take full advantage of its extraordinary brand equity, commanding market presence and significant future growth potential,” Antioco said in a statement. He and Redstone were not available for interviews.
Wall Street’s reaction was cautious, however, and Viacom stock rose just 6¢ to $29.68. “It’s kind of wait-and-see for what it means for Blockbuster,” said Natwest Securities analyst Gary Farber, who added that “the market got burned on Bill Fields.”
Fields, a former exec from Wal-Mart, was described by Redstone the day of his appointment in late March 1996 as “absolutely the ideal executive to lead Blockbuster into its second decade of growth.” Instead, he lasted just one year before quitting, apparently after a disagreement over the future strategy for the chain.
Blockbuster’s earnings, which account for about one-third of Viacom’s earnings, fell 15% in the first quarter after dropping 18% last year. Viacom blamed the decline on costs related to Blockbuster’s shift of its headquarters from Florida to Dallas and poor video releases, but analysts said the video rental business has been shrinking while the lower-margin video sell- through segment is growing.
Since Fields’ departure, Redstone has vowed to build up the video rental side of Blockbuster’s business at the expense of retailing, as well as concentrated on the nuts-and-bolts of the chain’s management. He told shareholders at the company’s annual meeting last week that Blockbuster had been “focused on growth … but there was much to be desired in operational excellence.”
Redstone and deputy chairman Tom Dooley have spent much of the past six weeks in Blockbuster’s headquarters in Dallas and Redstone told shareholders that “we found issues related to the buying of tapes, the depth of buying, the control of costs, the selection of store sites” as well as promotion and advertising.
Redstone said in a statement Tuesday that Viacom’s management had started efforts “designed to improve operations. We will continue to be closely involved and will work with John to redirect Blockbuster’s focus from short-term concerns to building a solid foundation of operational excellence.”
Viacom needs to demonstrate a turnaround at Blockbuster in the next six months as the company has promised to sell a minority stake in the chain in a public stock offering early next year.
The operational challenges make Antioco well suited to Blockbuster, analysts said. “He was very highly regarded at Pepsi … he was said to be a real operator,” said Brown Brothers Harriman analyst Jay Nelson.
Antioco only joined Taco Bell last October but in that time presided over an improvement in the fast-food chain’s performance. Its “same-store sales” (revenue adjusted for new store openings) rose 4% in the first quarter after declining last year, Nelson said.
In a statement Tuesday, PepsiCo chairman Roger Enrico called Antioco a “gifted executive who has done an extraordinary job in his brief time at Taco Bell.” Nevertheless, Enrico’s confidence in Antioco was limited, as PepsiCo reportedly hired a headhunter to review both inside and outside candidates to run the restaurant division. PepsiCo has yet to announce its selection for the job but Wall Street sources said Antioco did not get that post.
A PepsiCo spokesman declined to comment on whether Antioco was passed over, but confirmed that Enrico “took a very broad look in searching for the leadership of our new restaurant company.”
Analysts said Antioco is best known for the work he did at Circle K from 1992 to early 1996 when he “engineered a good turnaround,” said Bear Stearns analyst Joseph Buckley.
Antioco is known as a quick study who immerses himself in the operational details of the company he is running. His experience at Circle K should prepare him for Blockbuster — he reportedly redesigned the Circle K store layouts based on customer research and used a database of the stores to analyze which outlets to keep and which to close.
The exec began his career as a manager trainee at Southland Corp. in 1970 and joined Pearle Vision, the eyeglass chain, in 1990 before moving to Circle K two years later.
Analysts said the appointment is good news for Viacom’s management. “Its important to free up Sumner and Dooley so I’m glad to see it,” said Lehman Bros. analyst Larry Petrella.