Blockbuster Announces Up To 960 Stores Will Close
Blockbuster is looking lackluster.
Facing increasing pressure from Redbox, Netflix Inc. and its own debt problems, the video rental giant is doubling the number of stores it is likely to close by the end of next year, the company revealed in a regulatory filing Tuesday.
Struggling Blockbuster was previously aiming to shut 410 to 450 of its most unprofitable stores this year and next. A series of “accelerated closures” brings that target to 810 to 960.
Blockbuster also said it might convert an additional 250 to 300 locations to outlets that focus on used DVDs. That means 1,060 to 1,260 of Blockbuster’s stores will probably be shut down or transformed by next year.
There are 4,356 Blockbuster locations throughout the country, meaning 24% to 29% could be closed or altered within 16 months.
About 18% of Blockbuster’s stores are unprofitable, and 47% are only mildly profitable, according to the filing. A core 35% of the company’s locations provide 80% of its retail profit.
The accelerated store closures were triggered by a series of changes Blockbuster made to its debt agreements, which have squeezed its capital and forced it to cut back on marketing and in-store stock this year.
On Monday, Blockbuster announced it was issuing $340 million of secured notes, most of which would be used to pay down an existing line of credit that carried more onerous short-term payments. That triggered changes in its agreements with debtors that included permission to go through with several changes that have been sought by investors, including the store closures.
“They bought themselves time, and as long as the store closings are intelligent, they’ll do OK,” said Michael Pachter, an analyst at Wedbush Morgan Securities.
There’s a danger, however, that Blockbuster’s retrenchment could provide openings for its competitors.
