Blockbuster slashes full-year forecast, shares dive

LOS ANGELES (Reuters) - Blockbuster Inc BBI.N slashed its full-year earnings forecast in the face of increasing competition from the likes of Netflix Inc (NFLX.O)> and Coinstar Inc's (CSTR.O) Redbox.

The company's shares, which have traded for less than $1 since early June, fell 16 percent in after-market trade to 72 cents.

The nation's largest video rental chain posted a bigger-than-expected quarterly loss and lower-than-expected sales and revenue on Thursday.

In past years, the brick-and-mortar company has struggled to reposition itself while fending off an increasing challenge from quickly growing Redbox, which rents films for $1 per night at more than 17,000 automated kiosks around the United States.

Netflix's mail-order service and increasing online offerings, as well as on-demand services on the Internet, are also luring customers away from Blockbuster's slowly dwindling network of stores.

Taking a page from Redbox's book, Blockbuster plans to set up 10,000 stand-alone DVD rental kiosks across the country by the end of 2010. It said on Thursday it believes its deep ties with Hollywood could help, even as Redbox finds itself pitted against studios that feel its $1 rentals are hurting business.

Time Warner's (TWX.N) Warner home video unit on Thursday became the latest studio to push back, seeking to limit Redbox's access to new release DVDs -- a day after Redbox sued News Corp's (NWSA.O) Twentieth Century Fox for trying to bar it from renting films on the day of release.

In October, Redbox sued General Electric Co's (GE.N) Universal after the film studio told its wholesalers to stop supplying titles to Redbox within 45 days of release.

Universal countersued.

REDBOX WOES HELP?

In an interview, Blockbuster Chief Executive Jim Keyes said studios' feud with Redbox may prove beneficial.

"We're supporting the studios' position for a vending window. It's an advantage for Blockbuster because it complements our multichannel approach," he said.

He said a "vending rental window," which would keep "hot new releases" out of kiosks for a few weeks, would enable Blockbuster to be more aggressive with new releases in stores and then make use of the products at its own vending machines.

The growth of a vending alternative will enable Blockbuster to be more aggressive with store closures, he said.

Keyes said Blockbuster, which now has about 3,800 stores nationwide, is on track to close 200 to 300 this year but that number may rise if kiosks prove lucrative and cost-effective.

Blockbuster shares fell 14 cents to 72 cents in after-hours trade, after closing at 86 cents on the New York Stock Exchange.

The company said it now expects full-year earnings before interest, taxes, depreciation and amortization to range between $270 million and $290 million.

That updated full-year adjusted EBITDA guidance is sharply lower than a previously forecast range of $305 million to $325 million.

Blockbuster's net loss for the second quarter applicable to common shareholders totaled $39.7 million, or 21 cents per share, compared with a net loss of $44.7 million, or 23 cents per share a year earlier.

Excluding items, Blockbuster posted a loss of $36.9 million or 19 cents share. On that basis, analysts had forecast a loss of 10 cents a share, according to Reuters Estimates.

Revenue slid 22 percent to $1.02 billion from $1.3 billion as same-store sales fell 17.8 percent.

Analysts on average had been expecting revenue of $1.1 billion for the quarter, according to Reuters Estimates. Michael Pachter of Wedbush Morgan Securities said he had forecast same-store sales to fall 8.5 percent in the quarter.

(Editing by Edwin Chan, Carol Bishopric and Steve Orlofsky)