A Blockbuster year

DVD sales lift vidtailer's 2Q earnings by 50%

Video-rental giant Blockbuster lived up to its name on Wall Street Wednesday, delivering year-on-year improvement of nearly 50% in its second-quarter earnings thanks to strong demand for DVDs and aggressive cost-cutting.

Company, which is 80% owned by media conglom Viacom, also said its earnings for full year 2003 would come in 35% higher than last year’s numbers and significantly ahead of the current consensus forecasts from analysts.

For the latest quarter, net income was more than $61 million compared to $42 million a year earlier. Total revenues came in 10% higher at $1.39 billion.

DVD sale spurt

The big gains stemmed in large part from the sale of DVDs, which remain white-hot four years after their broad release. The company’s retail revenues for the latest quarter moved up by 45% to more than $275 million.

But that strength also masked a slowdown in Blockbuster’s traditional rental operations. Same-store rental revenues — that is, for stores open at least a year — actually fell by nearly 3%, as people moved toward either buying DVDs outright or renting them through online services like Netflix.

In addition, McAlpine Associates founder Dennis McAlpine said Wednesday that the company seems to be losing market share to some of its main brick-and-mortar rivals, Hollywood Entertainment and Movie Gallery. Both competitors have outpaced or will outpace Blockbuster in U.S. same-store revs for the current quarter.

Game for games

McAlpine noted, however, that Blockbuster is ramping up its efforts in the fast-growing vidgame market. Company has 14 outlets in the U.S. and Britain that feature separate game shops inside the larger videostores, and it plans to expand the program to as many as 200 stores worldwide by the end of the year.

Investors warmed to Blockbuster after the good news, bidding the company’s stock up by almost 3% to end the day’s trading at $16.30. Blockbuster had climbed by as much as 8% during the day.

Stock has been on the slide over the past year amid worries over consumers’ tendency to buy DVDs once rather than rent them over and over.

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