Blockbuster Goes Belly Up, Closing 900+ Stores - The UpStream

Blockbuster Goes Belly Up, Closing 900+ Stores

posted Saturday Sep 19, 2009 by Nicholas DiMeo

Blockbuster Goes Belly Up, Closing 900+ Stores

With competitors like Netflix and Redbox, Blockbuster appears to have fallen behind this year. Blockbuster set out to close all of its unprofitable stores. Out of over 7,000 stores, a shocking 18% were proven unprofitable. Their plan was to "improve four-wall profitability," and in order to achieve this goal, these stores had to be closed.

Blockbuster intends to close up to 960 stores by the end of next year, according to a Securities and Exchange Commission filing. This is in an attempt to make the company more financially stable. Even before this information was discovered, Blockbuster was planning "normal closures," which included anywhere between 280-300 locations. Also, an expected 300 or so stores will be considered "accelerated closures."

Next year looks a lot less gloomy for this chain, expecting to close only 100-125 locations that will be normal closures, and 130-150 that will be accelerated closures, according to the company's SEC filing. But overall, between 810-960 stores will be closed by the end of 2010.

Spokesperson, Randy Hargrove, tried to assure consumers that these numbers are not a sure bet, but we'll just have to wait and see.

Blockbuster isn't out of the hole though yet. Later down the line the company implies that about 300 locations will be subject to the company's "less mitigation/termination efforts" and another 300 may be converted to outlets. This could cause Blockbuster to close up to 1,560 stores, that 22% across the nation.

Hopefully this will be a smart move for the company, expecting to profit them up to $60 million dollars before interest, taxes, and other expenses.

There is some good news though! With all the downsizing throughout the company, the kiosk business is projected to grow. According to a separate filing with the SEC, Blockbusters current 497 kiosks are expected to grow considerably to 2,500 by the end of 2009, and to a whopping 10,000 by mid-2010 in hopes to compete with Redbox. Kiosks will hopefully allow a turn-around for blockbuster, because even though some stores are closing, the kiosks "will increase the points of distribution," and maximize the amount of product presented to people, stated Hargrove.

Compared to Neflix, at $44.00 per share, Blockbusters stock is not looking good at a measly $1.40 per share, and closing nearly 1,000 definitely will not help that number. The numbers just aren't looking too good for Blockbuster.

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