Blockbuster woes ease, rentals rise

Conglom cuts Q1 losses

Struggling Blockbuster, in the midst of a major revamp, cut its losses sharply last quarter and racked up the first gains in U.S. same-store rentals in three years.

While the future of the video retail biz may be too uncertain to proclaim a turnaround, the company’s been assiduously shuttering stores, honing its merchandise and cutting costs, managing to slash its first quarter losses to $4.7 million compared with $57.5 million a year ago.

Revenue fell about 8% to $1.4 billion, reflecting 200 fewer stores year on year, as chairman-CEO John Antioco said company is focused on profits, not sales.

The numbers build on a relatively upbeat fourth quarter ’05 as the company digs itself out of a deep financial hole that had some whispering last year about a possible bankruptcy filing.

Company execs said the vidtailer would have earned $13 million excluding expenses for store closings and severance for laid-off workers.

Same-store rental revenue, a closely watched measure for Blockbuster, rose 2.1% in the U.S.

Wall Streeters applauded the company’s lean and mean approach. But they were also disappointed by slow growth at Blockbuster’s online service, which added 100,000 customers to end the quarter at 1.3 million.

Service is having a tough time making inroads against online pioneer Netflix, which added nearly 700,000 customers over the same timeframe for a total of 4.9 million subs.

Blockbuster hopes to add another 700,000 customers this year — only half the growth Netflix predicts.

“If we hit our goal and they hit theirs, we’ll both be growing rapidly,” Antioco said during a conference call, noting that Blockbuster would be growing faster in percentage terms.

And Antioco dismissed doomsday scenarios of the death of the movie rental biz.

“No matter what forecast you look at, in-store rental is still projected to be a multibillion business years into the future,” he said.

Shares of Blockbuster fell 2.66% to close at $4.76.